After the recent decline, Shenzhen Mingdiao Decoration Co.,Ltd. (SZSE:002830) CEO Ji Xiao Lan's holdings have lost 11% of their value

Key Insights

• Shenzhen Mingdiao DecorationLtd's significant insider ownership suggests inherent interests in company's expansion
• 67% of the business is held by the top 3 shareholders
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Shenzhen Mingdiao Decoration Co.,Ltd. (SZSE:002830), it is important to understand the ownership structure of the business. With 72% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 11% decline in share price, insiders suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Shenzhen Mingdiao DecorationLtd.

Check out our latest analysis for Shenzhen Mingdiao DecorationLtd

What Does The Institutional Ownership Tell Us About Shenzhen Mingdiao DecorationLtd?

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.

Shenzhen Mingdiao DecorationLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Shenzhen Mingdiao DecorationLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Shenzhen Mingdiao DecorationLtd. With a 23% stake, CEO Ji Xiao Lan is the largest shareholder. The second and third largest shareholders are Jin Cheng Lin and Xu Wen Peng, with an equal amount of shares to their name at 22%. Note that two of the top three shareholders are also Senior Key Executive and Member of the Board of Directors, respectively, once again pointing to significant ownership by company insiders.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 67% stake.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Shenzhen Mingdiao DecorationLtd

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.

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 information suggests that insiders own more than half of Shenzhen Mingdiao Decoration Co.,Ltd.. This gives them effective control of the company. So they have a CN¥986m stake in this CN¥1.4b business. 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

The general public-- including retail investors -- own 22% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Shenzhen Mingdiao DecorationLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Shenzhen Mingdiao DecorationLtd , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.