Zhejiang Juhua Co., Ltd.'s (SHSE:600160) stock price dropped 11% last week; private companies would not be happy

Key Insights

• Zhejiang Juhua's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The largest shareholder of the company is Sinochem Group Co., Ltd. with a 53% stake
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

If you want to know who really controls Zhejiang Juhua Co., Ltd. (SHSE:600160), then you'll have to look at the makeup of its share registry. With 53% stake, private companies 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.

And last week, private companies endured the biggest losses as the stock fell by 11%.

In the chart below, we zoom in on the different ownership groups of Zhejiang Juhua.

Check out our latest analysis for Zhejiang Juhua

What Does The Institutional Ownership Tell Us About Zhejiang Juhua?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Zhejiang Juhua 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. 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 Juhua, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Zhejiang Juhua. The company's largest shareholder is Sinochem Group Co., Ltd., with ownership of 53%. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. National Council for Social Security Fund is the second largest shareholder owning 1.4% of common stock, and Zhimin Yuan holds about 1.2% of the company stock.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Zhejiang Juhua

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.

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 most recent data indicates that insiders own some shares in Zhejiang Juhua Co., Ltd.. This is a big company, so it is good to see this level of alignment. Insiders own CN¥615m 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

The general public-- including retail investors -- own 37% 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.

Private Company Ownership

We can see that Private Companies own 53%, of the shares on issue. 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:

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 1 warning sign with Zhejiang Juhua , and understanding them should be part of your investment process.

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.