The recent 93% gain must have brightened Top Key Executive Yuqiu Zhang's week, China Treasures New Materials Group Ltd.'s (HKG:2439) most bullish insider

Key Insights

• Significant insider control over China Treasures New Materials Group implies vested interests in company growth
• A total of 3 investors have a majority stake in the company with 55% ownership
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of China Treasures New Materials Group Ltd. (HKG:2439), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, insiders benefitted the most after the company's market cap rose by HK$425m last week.

Let's take a closer look to see what the different types of shareholders can tell us about China Treasures New Materials Group.

Check out our latest analysis for China Treasures New Materials Group

What Does The Lack Of Institutional Ownership Tell Us About China Treasures New Materials Group?

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 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. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. China Treasures New Materials Group might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in China Treasures New Materials Group. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In China Treasures New Materials Group's case, its Top Key Executive, Yuqiu Zhang, is the largest shareholder, holding 30% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 17% and 8.3%, of the shares outstanding, respectively. Interestingly, the second-largest shareholder, Yuzhu Shan is also Chief Executive Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of China Treasures New Materials 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.

Our information suggests that insiders maintain a significant holding in China Treasures New Materials Group Ltd.. It has a market capitalization of just HK$880m, and insiders have HK$425m worth of shares in their own names. We 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, who are usually individual investors, hold a 43% stake in China Treasures New Materials Group. 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 Equity Ownership

Private equity firms hold a 8.3% stake in China Treasures New Materials Group. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China Treasures New Materials Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for China Treasures New Materials Group you should be aware of.

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.

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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.