After the recent decline, Zhuzhou Hongda Electronics Corp.,Ltd. (SZSE:300726) CEO Chen Zeng's holdings have lost 4.6% of their value

Key Insights

• Zhuzhou Hongda ElectronicsLtd's significant insider ownership suggests inherent interests in company's expansion
• The top 2 shareholders own 64% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Zhuzhou Hongda Electronics Corp.,Ltd. (SZSE:300726) can tell us which group is most powerful. With 69% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 4.6% decline in share price, insiders suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Zhuzhou Hongda ElectronicsLtd.

See our latest analysis for Zhuzhou Hongda ElectronicsLtd

What Does The Institutional Ownership Tell Us About Zhuzhou Hongda ElectronicsLtd?

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.

We can see that Zhuzhou Hongda ElectronicsLtd does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Zhuzhou Hongda ElectronicsLtd'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 Zhuzhou Hongda ElectronicsLtd. With a 34% stake, CEO Chen Zeng is the largest shareholder. Meanwhile, the second and third largest shareholders, hold 30% and 5.1%, of the shares outstanding, respectively.

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. 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 Zhuzhou Hongda ElectronicsLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 own more than half of Zhuzhou Hongda Electronics Corp.,Ltd.. This gives them effective control of the company. That means insiders have a very meaningful CN¥6.2b stake in this CN¥9.0b business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

The general public-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Zhuzhou Hongda ElectronicsLtd has 2 warning signs we think you should be aware of.

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.