Dongjiang Environmental Company Limited's (HKG:895) market cap surged HK$188m last week, retail investors who have a lot riding on the company were rewarded

Key Insights

• Significant control over Dongjiang Environmental by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 7 shareholders own 51% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

Every investor in Dongjiang Environmental Company Limited (HKG:895) should be aware of the most powerful shareholder groups. With 48% stake, retail investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, retail investors were the biggest beneficiaries of last week’s 10% gain.

In the chart below, we zoom in on the different ownership groups of Dongjiang Environmental.

Check out our latest analysis for Dongjiang Environmental

What Does The Institutional Ownership Tell Us About Dongjiang Environmental?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Dongjiang Environmental. 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 Dongjiang Environmental's historic earnings and revenue below, but keep in mind there's always more to the story.

Dongjiang Environmental is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Guangdong Guangsheng Holding Group Co., Ltd. with 26% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 4.5% of the stock.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. 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 Dongjiang Environmental

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Shareholders would probably be interested to learn that insiders own shares in Dongjiang Environmental Company Limited. As individuals, the insiders collectively own HK$126m worth of the HK$5.6b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 48% stake in Dongjiang Environmental. 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

Our data indicates that Private Companies hold 43%, of the company's shares. 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. Take risks for example - Dongjiang Environmental has 3 warning signs (and 2 which are concerning) we think you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

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

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.