Insiders were the key beneficiaries as Shanxi Huhua Group Co., Ltd.'s (SZSE:003002) market cap rises to CN¥2.4b

Key Insights

• Shanxi Huhua Group's significant insider ownership suggests inherent interests in company's expansion
• 57% of the business is held by the top 3 shareholders
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Shanxi Huhua Group Co., Ltd. (SZSE:003002) can tell us which group is most powerful. The group holding the most number of shares in the company, around 33% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders were the biggest beneficiaries of last week’s 15% gain.

In the chart below, we zoom in on the different ownership groups of Shanxi Huhua Group.

See our latest analysis for Shanxi Huhua Group

What Does The Institutional Ownership Tell Us About Shanxi Huhua Group?

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.

Shanxi Huhua Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Shanxi Huhua Group's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Shanxi Huhua Group. The company's largest shareholder is Changzhi Fangyuan Investment Co., Ltd., with ownership of 27%. Meanwhile, the second and third largest shareholders, hold 21% and 10.0%, of the shares outstanding, respectively. Dong Qin, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Shanxi Huhua Group

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of Shanxi Huhua Group Co., Ltd.. Insiders own CN¥812m worth of shares in the CN¥2.4b 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 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shanxi Huhua Group. 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

Our data indicates that Private Companies hold 27%, of the company's shares. 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 Shanxi Huhua Group better, we need to consider many other factors. Be aware that Shanxi Huhua Group is showing 2 warning signs 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.