The recent CN¥423m market cap decrease is likely to have disappointed insiders invested in Gansu Guofang Industry & Trade (Group) Co., Ltd. (SHSE:601086)

Key Insights

• Gansu Guofang Industry & Trade (Group)'s significant insider ownership suggests inherent interests in company's expansion
• A total of 2 investors have a majority stake in the company with 70% ownership
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Gansu Guofang Industry & Trade (Group) Co., Ltd. (SHSE:601086), it is important to understand the ownership structure of the business. With 76% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, insiders endured the biggest losses as the stock fell by 11%.

Let's take a closer look to see what the different types of shareholders can tell us about Gansu Guofang Industry & Trade (Group).

Check out our latest analysis for Gansu Guofang Industry & Trade (Group)

What Does The Institutional Ownership Tell Us About Gansu Guofang Industry & Trade (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.

Less than 5% of Gansu Guofang Industry & Trade (Group) is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

Hedge funds don't have many shares in Gansu Guofang Industry & Trade (Group). Our data shows that Guofang Zhang is the largest shareholder with 49% of shares outstanding. With 21% and 6.5% of the shares outstanding respectively, Chunfang Zhang and Huiyang Zhang are the second and third largest shareholders. Huiyang Zhang, 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 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. 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 Gansu Guofang Industry & Trade (Group)

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.

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.

It seems that insiders own more than half the Gansu Guofang Industry & Trade (Group) Co., Ltd. stock. This gives them a lot of power. Given it has a market cap of CN¥3.6b, that means they have CN¥2.7b worth of shares. 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 21% stake in the company, and hence can't easily be ignored. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Gansu Guofang Industry & Trade (Group) is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.

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

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.