Is Huaxi Holdings Company Limited (HKG:1689) Popular Amongst Insiders?

The big shareholder groups in Huaxi Holdings Company Limited (HKG:1689) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

With a market capitalization of HK$1.6b, Huaxi Holdings is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutional investors have not yet purchased shares. Let's take a closer look to see what the different types of shareholders can tell us about Huaxi Holdings.

View our latest analysis for Huaxi Holdings

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

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in 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. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Huaxi Holdings, for yourself, below.

We note that hedge funds don't have a meaningful investment in Huaxi Holdings. Looking at our data, we can see that the largest shareholder is the CEO Yi Sheng Zheng with 64% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. Minsheng Zheng is the second largest shareholder owning 0.2% of common stock, and Dimensional Fund Advisors L.P. holds about 0.1% of the company stock. Interestingly, the second-largest shareholder, Minsheng Zheng is also Senior Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

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. 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 Huaxi Holdings

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders own more than half of Huaxi Holdings Company Limited. This gives them effective control of the company. That means they own HK$1.0b worth of shares in the HK$1.6b company. That's quite meaningful. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, with a 35% stake in the company, will not easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Huaxi Holdings is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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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