The recent pullback must have dismayed Naipu Mining Machinery Co., Ltd. (SZSE:300818) insiders who own 56% of the company

Key Insights

• Insiders appear to have a vested interest in Naipu Mining Machinery's growth, as seen by their sizeable ownership
• 50% of the company is held by a single shareholder (Hao Zheng)
• Institutional ownership in Naipu Mining Machinery is 16%

A look at the shareholders of Naipu Mining Machinery Co., Ltd. (SZSE:300818) can tell us which group is most powerful. We can see that individual insiders own the lion's share in the company with 56% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, insiders endured the biggest losses as the stock fell by 14%.

In the chart below, we zoom in on the different ownership groups of Naipu Mining Machinery.

See our latest analysis for Naipu Mining Machinery

What Does The Institutional Ownership Tell Us About Naipu Mining Machinery?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Naipu Mining Machinery does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Naipu Mining Machinery, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Naipu Mining Machinery. The company's largest shareholder is Hao Zheng, with ownership of 50%. This implies that they have majority interest control of the future of the company. With 7.4% and 5.4% of the shares outstanding respectively, AEGON-Industrial Fund Management Co. Ltd. and Zhiguo Qu are the second and third largest shareholders.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Naipu Mining Machinery

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders own more than half of Naipu Mining Machinery Co., Ltd.. This gives them effective control of the company. That means they own CN¥2.0b worth of shares in the CN¥3.6b company. That's quite meaningful. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Naipu Mining Machinery. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Naipu Mining Machinery (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.