Great week for Jiangsu Hualan New Pharmaceutical Material Co.,Ltd. (SZSE:301093) institutional investors after losing 27% over the previous year

Key Insights

• Given the large stake in the stock by institutions, Jiangsu Hualan New Pharmaceutical MaterialLtd's stock price might be vulnerable to their trading decisions
• The top 5 shareholders own 51% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Jiangsu Hualan New Pharmaceutical Material Co.,Ltd. (SZSE:301093), then you'll have to look at the makeup of its share registry. With 38% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

After a year of 27% losses, last week’s 28% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

In the chart below, we zoom in on the different ownership groups of Jiangsu Hualan New Pharmaceutical MaterialLtd.

Check out our latest analysis for Jiangsu Hualan New Pharmaceutical MaterialLtd

What Does The Institutional Ownership Tell Us About Jiangsu Hualan New Pharmaceutical MaterialLtd?

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.

We can see that Jiangsu Hualan New Pharmaceutical MaterialLtd does have institutional investors; and they hold a good portion of the company's stock. 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 Jiangsu Hualan New Pharmaceutical MaterialLtd'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 Jiangsu Hualan New Pharmaceutical MaterialLtd. Jiangyin Hualan Electromechanical Technology Co., Ltd. is currently the largest shareholder, with 22% of shares outstanding. With 17% and 5.8% of the shares outstanding respectively, Huaxia Life Insurance Co. Ltd, Asset Management Arm and Yimin Hua are the second and third largest shareholders. Yimin Hua, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Jiangsu Hualan New Pharmaceutical MaterialLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in Jiangsu Hualan New Pharmaceutical Material Co.,Ltd.. It has a market capitalization of just CN¥3.2b, and insiders have CN¥214m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Jiangsu Hualan New Pharmaceutical MaterialLtd. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 24%, of the Jiangsu Hualan New Pharmaceutical MaterialLtd 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Jiangsu Hualan New Pharmaceutical MaterialLtd better, we need to consider many other factors. For instance, we've identified 2 warning signs for Jiangsu Hualan New Pharmaceutical MaterialLtd that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.