What Does China Huarong Energy Company Limited's (HKG:1101) Ownership Structure Look Like?

I am going to take a deep dive into China Huarong Energy Company Limited’s (SEHK:1101) most recent ownership structure, not a frequent subject of discussion among individual investors. The impact of a company's ownership structure affects both its short- and long-term performance. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Now I will analyze 1101's shareholder registry in more detail.

Check out our latest analysis for China Huarong Energy

Institutional Ownership

1101's 11.37% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. Although 1101 has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. For shareholders in 1101, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn't necessarily lead to high short-term volatility, we should dig deeper into 1101's ownership structure to find how the remaining owner types can affect its investment profile.

Insider Ownership

I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders' interests with the management. 1101 insiders hold a significant stake of 35.17% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). Another aspect of insider ownership is to learn about their recent transactions. Insider buying may be a sign of upbeat future expectations, however, selling doesn't necessarily mean the opposite as insiders may be motivated by their personal financial needs.

General Public Ownership

The general public holds a substantial 53.46% stake in 1101, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.

Next Steps:

1101's considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, if you are building an investment case for 1101, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as China Huarong Energy's past track record and financial health. I highly recommend you to complete your research by taking a look at the following:

• 1. Financial Health: Is 1101’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
• 2. Past Track Record: Has 1101 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of 1101's historicals for more clarity.
• 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.