CEO Youzhong Lu, YouYou Foods Co., Ltd.'s (SHSE:603697) largest shareholder sees value of holdings go down 10% after recent drop

Key Insights

• YouYou Foods' significant insider ownership suggests inherent interests in company's expansion
• Youzhong Lu owns 65% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

Every investor in YouYou Foods Co., Ltd. (SHSE:603697) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 70% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As market cap fell to CN¥2.5b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

Let's delve deeper into each type of owner of YouYou Foods, beginning with the chart below.

View our latest analysis for YouYou Foods

What Does The Institutional Ownership Tell Us About YouYou Foods?

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.

Since institutions own only a small portion of YouYou Foods, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

We note that hedge funds don't have a meaningful investment in YouYou Foods. The company's CEO Youzhong Lu is the largest shareholder with 65% of shares outstanding. This implies that they possess majority interests and have significant control over the company. Investors usually consider it a good sign when the company leadership has such a significant stake, as this is widely perceived to increase the chance that the management will act in the best interests of the company. For context, the second largest shareholder holds about 5.1% of the shares outstanding, followed by an ownership of 0.5% by the third-largest shareholder.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 YouYou Foods

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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

It seems that insiders own more than half the YouYou Foods Co., Ltd. stock. This gives them a lot of power. So they have a CN¥1.8b stake in this CN¥2.5b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand YouYou Foods better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with YouYou Foods (at least 2 which are significant) , 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.