Insiders the biggest winners as Zhejiang Taihua New Material Group Co., Ltd.'s (SHSE:603055) market cap rises to CN¥10b

Key Insights

• Insiders appear to have a vested interest in Zhejiang Taihua New Material Group's growth, as seen by their sizeable ownership
• 52% of the business is held by the top 2 shareholders
• Institutions own 14% of Zhejiang Taihua New Material Group

Every investor in Zhejiang Taihua New Material Group Co., Ltd. (SHSE:603055) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 66% to be precise, is individual insiders. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, insiders scored the highest last week as the company hit CN¥10b market cap following a 8.1% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Zhejiang Taihua New Material Group.

Check out our latest analysis for Zhejiang Taihua New Material Group

What Does The Institutional Ownership Tell Us About Zhejiang Taihua New Material Group?

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.

Zhejiang Taihua New Material Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Zhejiang Taihua New Material Group, (below). Of course, keep in mind that there are other factors to consider, too.

Zhejiang Taihua New Material Group is not owned by hedge funds. The company's largest shareholder is Xiu You Shi, with ownership of 28%. For context, the second largest shareholder holds about 24% of the shares outstanding, followed by an ownership of 14% by the third-largest shareholder. Wei Feng Shen, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Zhejiang Taihua New Material Group

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Our most recent data indicates that insiders own the majority of Zhejiang Taihua New Material Group Co., Ltd.. This means they can collectively make decisions for the company. Insiders own CN¥6.6b worth of shares in the CN¥10b company. That's extraordinary! Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

The general public-- including retail investors -- own 19% 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Zhejiang Taihua New Material Group you should be aware of, and 1 of them shouldn't be ignored.

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.