What Kind Of Shareholders Hold The Majority In China Dongxiang (Group) Co., Ltd.'s (HKG:3818) Shares?

Every investor in China Dongxiang (Group) Co., Ltd. (HKG:3818) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.

China Dongxiang (Group) is not a large company by global standards. It has a market capitalization of HK$5.3b, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about China Dongxiang (Group).

See our latest analysis for China Dongxiang (Group)

What Does The Institutional Ownership Tell Us About China Dongxiang (Group)?

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.

As you can see, institutional investors have a fair amount of stake in China Dongxiang (Group). This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 China Dongxiang (Group)'s historic earnings and revenue below, but keep in mind there's always more to the story.

China Dongxiang (Group) is not owned by hedge funds. Our data suggests that Yihong Chen, who is also the company's Top Key Executive, holds the most number of shares at 39%. 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 4.8% and 3.4% of the stock. Interestingly, the third-largest shareholder, Chen Chen is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders. In addition, we found that Zhiyong Zhang, the CEO has 2.8% of the shares allocated to his name

On looking further, we found that 52% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of China Dongxiang (Group)

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.

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.

It seems insiders own a significant proportion of China Dongxiang (Group) Co., Ltd.. Insiders have a HK$2.4b stake in this HK$5.3b business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, with a 41% stake in the company, will not easily be ignored. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China Dongxiang (Group) better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with China Dongxiang (Group) .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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. 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.
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