Today, I will be analyzing China Fire Safety Enterprise Group Limited’s (SEHK:445) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Now I will analyze 445’s shareholder registry in more detail.View our latest analysis for China Fire Safety Enterprise Group
Institutional OwnershipInstitutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. With hardly any institutional ownership, 445 stock poses limited concern relating to the effect institutional block trades have on its stock price.
Insider OwnershipAnother important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. 28.93% ownership of 445 insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). Another aspect of insider ownership is to learn about their recent transactions. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public OwnershipA substantial ownership of 40.88% in 445 is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Public Company OwnershipPotential investors in 445 should also look at another important group of investors: other public companies, with a stake of 30.00%, who are primarily invested because of strategic and capital gain interests. With this size of ownership in 445, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
Institutional ownership level and composition in 445 is not high nor active enough to significantly impact its investment thesis. However, ownership structure should not be the only focus of your research when constructing an investment thesis around 445. Rather, you should be looking at fundamental drivers such as China Fire Safety Enterprise Group’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 445’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 445 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 445’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.