Do Insiders Own Shares In China Wood Optimization (Holding) Limited (HKG:1885)?

If you want to know who really controls China Wood Optimization (Holding) Limited (HKG:1885), 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.

With a market capitalization of HK$2.0b, China Wood Optimization (Holding) is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutions don’t own many shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about 1885.

See our latest analysis for China Wood Optimization (Holding)

SEHK:1885 Ownership Summary, March 29th 2019
SEHK:1885 Ownership Summary, March 29th 2019

What Does The Lack Of Institutional Ownership Tell Us About China Wood Optimization (Holding)?

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 are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. It is also possible that fund managers don’t own the stock because they aren’t convinced it will perform well. China Wood Optimization (Holding)’s earnings and revenue track record (below) may not be compelling to institutional investors — or they simply might not have looked at the business closely.

SEHK:1885 Income Statement, March 29th 2019
SEHK:1885 Income Statement, March 29th 2019

We note that hedge funds don’t have a meaningful investment in China Wood Optimization (Holding). 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 China Wood Optimization (Holding)

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our information suggests that insiders own more than half of China Wood Optimization (Holding) Limited. This gives them effective control of the company. That means they own HK$1.5b worth of shares in the HK$2.0b company. That’s quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 27% ownership, the general public have some degree of sway over 1885. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.