Shandong Hongyu Precision Machinery Co., Ltd. (SZSE:002890) insiders, who hold 70% of the firm would be disappointed by the recent pullback

Key Insights

• Significant insider control over Shandong Hongyu Precision Machinery implies vested interests in company growth
• The top 3 shareholders own 52% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Shandong Hongyu Precision Machinery Co., Ltd. (SZSE:002890) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual insiders with 70% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, insiders as a group endured the highest losses after market cap fell by CN¥297m.

In the chart below, we zoom in on the different ownership groups of Shandong Hongyu Precision Machinery.

View our latest analysis for Shandong Hongyu Precision Machinery

What Does The Lack Of Institutional Ownership Tell Us About Shandong Hongyu Precision Machinery?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Shandong Hongyu Precision Machinery might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Shandong Hongyu Precision Machinery is not owned by hedge funds. The company's largest shareholder is Jun Xin, with ownership of 29%. Meanwhile, the second and third largest shareholders, hold 16% and 7.4%, of the shares outstanding, respectively. Additionally, the company's CEO Qiu Jie Liu directly holds 3.0% of the total shares outstanding.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Shandong Hongyu Precision Machinery

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own the majority of Shandong Hongyu Precision Machinery Co., Ltd.. This means they can collectively make decisions for the company. That means they own CN¥992m worth of shares in the CN¥1.4b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Shandong Hongyu Precision Machinery better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Shandong Hongyu Precision Machinery , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.