Huafu Fashion Co., Ltd.'s (SZSE:002042) biggest owners are private companies who got richer after stock soared 9.7% last week

Key Insights

• Significant control over Huafu Fashion by private companies implies that the general public has more power to influence management and governance-related decisions
• A total of 6 investors have a majority stake in the company with 50% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Huafu Fashion Co., Ltd. (SZSE:002042), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 48% to be precise, is private companies. 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, private companies collectively scored the highest last week as the company hit CN¥5.2b market cap following a 9.7% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Huafu Fashion.

View our latest analysis for Huafu Fashion

What Does The Institutional Ownership Tell Us About Huafu Fashion?

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.

As you can see, institutional investors have a fair amount of stake in Huafu Fashion. 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 Huafu Fashion, (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 Huafu Fashion. Huafu Holding Co., Ltd. is currently the company's largest shareholder with 31% of shares outstanding. Anhui Feiya Textile Group Ltd. is the second largest shareholder owning 8.0% of common stock, and Shenzhen Chinese Investment Co., Ltd. holds about 5.1% of the company stock.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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

Insider Ownership Of Huafu Fashion

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

We note our data does not show any board members holding shares, personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

With a 47% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Huafu Fashion. 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.

Private Company Ownership

Our data indicates that Private Companies hold 48%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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. To that end, you should learn about the 2 warning signs we've spotted with Huafu Fashion (including 1 which is potentially serious) .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.