A fantastic week for Hunan Fangsheng Pharmaceutical Co., Ltd.'s (SHSE:603998) 37% institutional owners, one-year returns continue to impress

Key Insights

• Significantly high institutional ownership implies Hunan Fangsheng Pharmaceutical's stock price is sensitive to their trading actions
• The top 6 shareholders own 51% of the company
• Insider ownership in Hunan Fangsheng Pharmaceutical is 37%

Every investor in Hunan Fangsheng Pharmaceutical Co., Ltd. (SHSE:603998) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 37% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Last week’s 11% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 1.7% and last week’s gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of Hunan Fangsheng Pharmaceutical.

Check out our latest analysis for Hunan Fangsheng Pharmaceutical

What Does The Institutional Ownership Tell Us About Hunan Fangsheng Pharmaceutical?

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.

As you can see, institutional investors have a fair amount of stake in Hunan Fangsheng Pharmaceutical. 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. 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 Hunan Fangsheng Pharmaceutical, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Hunan Fangsheng Pharmaceutical. Our data shows that Qinghua Zhang is the largest shareholder with 36% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.2% and 3.5%, of the shares outstanding, respectively.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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

Insider Ownership Of Hunan Fangsheng Pharmaceutical

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 most recent data indicates that insiders own a reasonable proportion of Hunan Fangsheng Pharmaceutical Co., Ltd.. Insiders have a CN¥1.8b stake in this CN¥4.8b 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

With a 24% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hunan Fangsheng Pharmaceutical. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Hunan Fangsheng Pharmaceutical better, we need to consider many other factors. For instance, we've identified 3 warning signs for Hunan Fangsheng Pharmaceutical that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.