Insiders were the biggest winners as Shandong Daye Co., Ltd.'s (SHSE:603278) market cap grew by CN¥414m last week

Key Insights

• Shandong Daye's significant insider ownership suggests inherent interests in company's expansion
• The top 2 shareholders own 51% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Shandong Daye Co., Ltd. (SHSE:603278), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 53% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, insiders scored the highest last week as the company hit CN¥4.4b market cap following a 10% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Shandong Daye.

View our latest analysis for Shandong Daye

What Does The Institutional Ownership Tell Us About Shandong Daye?

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 Shandong Daye. 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. 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 Shandong Daye's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Shandong Daye. Yong Dou is currently the company's largest shareholder with 33% of shares outstanding. In comparison, the second and third largest shareholders hold about 18% and 2.3% 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.

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. 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 Shandong Daye

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that insiders own more than half of Shandong Daye Co., Ltd.. This gives them effective control of the company. So they have a CN¥2.3b stake in this CN¥4.4b business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or 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.

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. Case in point: We've spotted 3 warning signs for Shandong Daye you should be aware of.

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.