While institutions invested in Hangzhou Greatstar Industrial Co., Ltd (SZSE:002444) benefited from last week's 9.3% gain, private companies stood to gain the most

Key Insights

• Significant control over Hangzhou Greatstar Industrial by private companies implies that the general public has more power to influence management and governance-related decisions
• 51% of the business is held by the top 4 shareholders
• Institutions own 28% of Hangzhou Greatstar Industrial

To get a sense of who is truly in control of Hangzhou Greatstar Industrial Co., Ltd (SZSE:002444), it is important to understand the ownership structure of the business. With 39% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Private companies gained the most after market cap touched CN¥37b last week, while institutions who own 28% also benefitted.

Let's delve deeper into each type of owner of Hangzhou Greatstar Industrial, beginning with the chart below.

View our latest analysis for Hangzhou Greatstar Industrial

What Does The Institutional Ownership Tell Us About Hangzhou Greatstar Industrial?

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.

As you can see, institutional investors have a fair amount of stake in Hangzhou Greatstar Industrial. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Hangzhou Greatstar Industrial's historic earnings and revenue below, but keep in mind there's always more to the story.

Hangzhou Greatstar Industrial is not owned by hedge funds. Great Star United Holding Group Co., Ltd. is currently the company's largest shareholder with 39% of shares outstanding. For context, the second largest shareholder holds about 4.7% of the shares outstanding, followed by an ownership of 4.3% by the third-largest shareholder. Jianping Qiu, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 Hangzhou Greatstar Industrial

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own some shares in Hangzhou Greatstar Industrial Co., Ltd. The insiders have a meaningful stake worth CN¥2.1b. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hangzhou Greatstar Industrial. 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

We can see that Private Companies own 39%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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 1 warning sign with Hangzhou Greatstar Industrial , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.