What Kind Of Shareholders Hold The Majority In National Electronics Holdings Limited's (HKG:213) Shares?

If you want to know who really controls National Electronics Holdings Limited (HKG:213), then you'll have to look at the makeup of its share registry. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

National Electronics Holdings is a smaller company with a market capitalization of HK$1.0b, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutional investors have not yet purchased much of the company. Let's take a closer look to see what the different types of shareholders can tell us about National Electronics Holdings.

View our latest analysis for National Electronics Holdings

What Does The Lack Of Institutional Ownership Tell Us About National Electronics Holdings?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. National Electronics Holdings' earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

Hedge funds don't have many shares in National Electronics Holdings. Our data suggests that Yuen Ching Lee, who is also the company's Top Key Executive, holds the most number of shares at 28%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. In comparison, the second and third largest shareholders hold about 27% and 5.6% of the stock. Interestingly, the third-largest shareholder, Bon Chi Lee is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

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 55% stake.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of National Electronics Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in National Electronics Holdings Limited. Insiders have a HK$388m stake in this HK$1.0b business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public holds a 34% stake in National Electronics Holdings. 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 Company Ownership

It seems that Private Companies own 27%, of the National Electronics Holdings stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand National Electronics Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with National Electronics Holdings (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

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.

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