Insiders were the biggest winners as Suzhou Longway Eletronic Machinery Co., Ltd's (SZSE:301202) market cap grew by CN¥446m last week

Key Insights

• Insiders appear to have a vested interest in Suzhou Longway Eletronic Machinery's growth, as seen by their sizeable ownership
• The top 2 shareholders own 54% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Suzhou Longway Eletronic Machinery Co., Ltd (SZSE:301202), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 56% ownership. 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 8.7% gain.

Let's take a closer look to see what the different types of shareholders can tell us about Suzhou Longway Eletronic Machinery.

Check out our latest analysis for Suzhou Longway Eletronic Machinery

What Does The Institutional Ownership Tell Us About Suzhou Longway Eletronic Machinery?

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 Suzhou Longway Eletronic Machinery 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 company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. 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.

Suzhou Longway Eletronic Machinery is not owned by hedge funds. The company's largest shareholder is Liqin Gao, with ownership of 36%. Ningbo Lingying Trading Co., Ltd. is the second largest shareholder owning 19% of common stock, and Lichong Gao holds about 12% of the company stock. Lichong Gao, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Additionally, the company's CEO Jianqiang Gao directly holds 8.2% of the total shares outstanding.

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.

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. 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 Suzhou Longway Eletronic Machinery

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.

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.

It seems that insiders own more than half the Suzhou Longway Eletronic Machinery Co., Ltd stock. This gives them a lot of power. That means they own CN¥3.1b worth of shares in the CN¥5.6b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Suzhou Longway Eletronic Machinery. 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.

Private Company Ownership

We can see that Private Companies own 19%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Suzhou Longway Eletronic Machinery (at least 1 which is significant) , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free 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.

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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.