Institutions along with individual investors who hold considerable shares inHuarui Electrical Appliance Co.,Ltd. (SZSE:300626) come under pressure; lose 12% of holdings value

Key Insights

• Significant control over Huarui Electrical ApplianceLtd by individual investors implies that the general public has more power to influence management and governance-related decisions
• 50% of the business is held by the top 9 shareholders
• 25% of Huarui Electrical ApplianceLtd is held by insiders

If you want to know who really controls Huarui Electrical Appliance Co.,Ltd. (SZSE:300626), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 49% to be precise, is individual investors. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of individual investors took a hit after last week’s 12% price drop, institutions with their 27% holdings also suffered.

In the chart below, we zoom in on the different ownership groups of Huarui Electrical ApplianceLtd.

View our latest analysis for Huarui Electrical ApplianceLtd

What Does The Institutional Ownership Tell Us About Huarui Electrical ApplianceLtd?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Huarui Electrical ApplianceLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Huarui Electrical ApplianceLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Huarui Electrical ApplianceLtd. Rui Liang Sun is currently the company's largest shareholder with 23% of shares outstanding. For context, the second largest shareholder holds about 18% of the shares outstanding, followed by an ownership of 3.2% by the third-largest shareholder.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Huarui Electrical ApplianceLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

It seems insiders own a significant proportion of Huarui Electrical Appliance Co.,Ltd.. Insiders have a CN¥376m stake in this CN¥1.5b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 49% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Huarui Electrical ApplianceLtd. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Huarui Electrical ApplianceLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Huarui Electrical ApplianceLtd , 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.

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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.