Retail investors in Guangdong Decro Film New Materials Co., Ltd. (SZSE:001378) are its biggest bettors, and their bets paid off as stock gained 11% last week

Key Insights

• Significant control over Guangdong Decro Film New Materials by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 9 shareholders own 50% of the company
• Insider ownership in Guangdong Decro Film New Materials is 11%

To get a sense of who is truly in control of Guangdong Decro Film New Materials Co., Ltd. (SZSE:001378), it is important to understand the ownership structure of the business. With 49% stake, retail investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, retail investors benefitted the most after the company's market cap rose by CN¥331m last week.

In the chart below, we zoom in on the different ownership groups of Guangdong Decro Film New Materials.

View our latest analysis for Guangdong Decro Film New Materials

What Does The Institutional Ownership Tell Us About Guangdong Decro Film New Materials?

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.

Since institutions own only a small portion of Guangdong Decro Film New Materials, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

We note that hedge funds don't have a meaningful investment in Guangdong Decro Film New Materials. Guangdong Decro Group Co., Ltd. is currently the largest shareholder, with 38% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.3% and 2.5% of the stock. Two of the top three shareholders happen to be Chief Executive Officer and Member of the Board of Directors, respectively. That is, insiders feature higher up in the heirarchy of the company's top shareholders.

We did some more digging and found that 9 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Guangdong Decro Film New Materials

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.

Our information suggests that insiders maintain a significant holding in Guangdong Decro Film New Materials Co., Ltd.. Insiders own CN¥366m worth of shares in the CN¥3.2b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 49% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Guangdong Decro Film New Materials. 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.

Private Company Ownership

It seems that Private Companies own 38%, of the Guangdong Decro Film New Materials stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Guangdong Decro Film New Materials (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

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