Lianhe Chemical Technology Co.,Ltd.'s (SZSE:002250) stock price dropped 8.0% last week; individual investors would not be happy

Key Insights

• The considerable ownership by individual investors in Lianhe Chemical TechnologyLtd indicates that they collectively have a greater say in management and business strategy
• 45% of the business is held by the top 25 shareholders
• 30% of Lianhe Chemical TechnologyLtd is held by insiders

A look at the shareholders of Lianhe Chemical Technology Co.,Ltd. (SZSE:002250) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual investors with 55% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of individual investors took a hit after last week’s 8.0% price drop, insiders with their 30% also suffered.

Let's delve deeper into each type of owner of Lianhe Chemical TechnologyLtd, beginning with the chart below.

View our latest analysis for Lianhe Chemical TechnologyLtd

What Does The Institutional Ownership Tell Us About Lianhe Chemical TechnologyLtd?

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 Lianhe Chemical TechnologyLtd does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Lianhe Chemical TechnologyLtd'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 Lianhe Chemical TechnologyLtd. Jinxiang Mou is currently the company's largest shareholder with 26% of shares outstanding. AEGON-Industrial Fund Management Co. Ltd. is the second largest shareholder owning 4.0% of common stock, and Youzhi Zhang holds about 2.4% of the company stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. 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 Lianhe Chemical TechnologyLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 a reasonable proportion of Lianhe Chemical Technology Co.,Ltd.. Insiders have a CN¥1.5b stake in this CN¥5.1b business. 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

The general public, who are usually individual investors, hold a substantial 55% stake in Lianhe Chemical TechnologyLtd, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Lianhe Chemical TechnologyLtd better, we need to consider many other factors. Be aware that Lianhe Chemical TechnologyLtd is showing 1 warning sign in our investment analysis , you should know about...

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.