China Railway Materials Company Limited's (SZSE:000927) market cap surged CN¥545m last week, private companies who have a lot riding on the company were rewarded

Key Insights

• The considerable ownership by private companies in China Railway Materials indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 56% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in China Railway Materials Company Limited (SZSE:000927) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 46% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies were the biggest beneficiaries of last week’s 3.9% gain.

Let's delve deeper into each type of owner of China Railway Materials, beginning with the chart below.

Check out our latest analysis for China Railway Materials

What Does The Institutional Ownership Tell Us About China Railway Materials?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

China Railway Materials already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 China Railway Materials, (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 China Railway Materials. China Logistics Group Co., Ltd. is currently the company's largest shareholder with 38% of shares outstanding. For context, the second largest shareholder holds about 18% of the shares outstanding, followed by an ownership of 7.6% by the third-largest shareholder.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 56% stake.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of China Railway Materials

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 China Railway Materials Company Limited insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. Keep in mind that it's a big company, and the insiders own CN¥9.8k worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 20% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With an ownership of 26%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

We can see that Private Companies own 46%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for China Railway Materials you should be aware of, and 1 of them makes us a bit uncomfortable.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

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