In the wake of Guangdong Guanghong Holdings Co.,Ltd.'s (SZSE:000529) latest CN¥368m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Guangdong Guanghong HoldingsLtd's stock price is sensitive to their trading actions
• The largest shareholder of the company is Guangdong Guanghong Asset Management Co. Ltd. with a 55% stake
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Guangdong Guanghong Holdings Co.,Ltd. (SZSE:000529), then you'll have to look at the makeup of its share registry. With 59% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by CN¥368m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 5.3% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell Guangdong Guanghong HoldingsLtd, which might have negative implications on individual investors.

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

View our latest analysis for Guangdong Guanghong HoldingsLtd

What Does The Institutional Ownership Tell Us About Guangdong Guanghong HoldingsLtd?

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.

Guangdong Guanghong HoldingsLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Guangdong Guanghong HoldingsLtd's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Guangdong Guanghong HoldingsLtd. Guangdong Guanghong Asset Management Co. Ltd. is currently the largest shareholder, with 55% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. With 1.4% and 1.0% of the shares outstanding respectively, Guangdong Silk (group) Corp. and Heshan Wool Textile Factory Bedding Plant are the second and third largest shareholders.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Guangdong Guanghong HoldingsLtd

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.

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.

We note our data does not show any board members holding shares, personally. Given we are not picking up on insider ownership, we may have missing data. Therefore, it would be interesting to assess the CEO compensation and tenure, here.

General Public Ownership

The general public-- including retail investors -- own 39% 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:

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 3 warning signs with Guangdong Guanghong HoldingsLtd (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com