Zhejiang Huatong Meat Products Co., Ltd.'s (SZSE:002840) market cap dropped CN¥428m last week; individual investors who hold 54% were hit as were institutions

Key Insights

• Significant control over Zhejiang Huatong Meat Products by private companies implies that the general public has more power to influence management and governance-related decisions
• A total of 2 investors have a majority stake in the company with 51% ownership
• Institutional ownership in Zhejiang Huatong Meat Products is 25%

Every investor in Zhejiang Huatong Meat Products Co., Ltd. (SZSE:002840) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 54% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions, who own 25% shares weren’t spared from last week’s CN¥428m market cap drop, private companies as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about Zhejiang Huatong Meat Products.

Check out our latest analysis for Zhejiang Huatong Meat Products

What Does The Institutional Ownership Tell Us About Zhejiang Huatong Meat Products?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Zhejiang Huatong Meat Products. 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 Zhejiang Huatong Meat Products, (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 Zhejiang Huatong Meat Products. The company's largest shareholder is Huatong Group Co., Ltd., with ownership of 30%. In comparison, the second and third largest shareholders hold about 21% and 2.4% of the stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 51% 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Zhejiang Huatong Meat Products

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

Our most recent data indicates that insiders own some shares in Zhejiang Huatong Meat Products Co., Ltd.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around CN¥122m worth of shares (at current prices). 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 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Zhejiang Huatong Meat Products. 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

It seems that Private Companies own 54%, of the Zhejiang Huatong Meat Products stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.