Zhejiang Zhengte Co., Ltd.'s (SZSE:001238) most bullish insider, CEO Yonghui Chen must be pleased with the recent 17% gain

Key Insights

• Significant insider control over Zhejiang Zhengte implies vested interests in company growth
• 70% of the company is held by a single shareholder (Yonghui Chen)
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

Every investor in Zhejiang Zhengte Co., Ltd. (SZSE:001238) should be aware of the most powerful shareholder groups. With 71% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders scored the highest last week as the company hit CN¥2.7b market cap following a 17% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about Zhejiang Zhengte.

View our latest analysis for Zhejiang Zhengte

What Does The Institutional Ownership Tell Us About Zhejiang Zhengte?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Zhejiang Zhengte 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. 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 Zhejiang Zhengte's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Zhejiang Zhengte. The company's CEO Yonghui Chen is the largest shareholder with 70% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. For context, the second largest shareholder holds about 2.7% of the shares outstanding, followed by an ownership of 1.3% by the third-largest shareholder. Interestingly, the third-largest shareholder, Xiaohua Hou is also a Chairman of Corporate Board, again, indicating strong insider ownership amongst the company's top shareholders.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Zhejiang Zhengte

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.

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 Zhengte Co., Ltd.. This means they can collectively make decisions for the company. Given it has a market cap of CN¥2.7b, that means they have CN¥1.9b worth of shares. 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, who are usually individual investors, hold a 21% stake in Zhejiang Zhengte. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Zhejiang Zhengte has 2 warning signs we think you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.