Private companies in China National Building Material Company Limited (HKG:3323) are its biggest bettors, and their bets paid off as stock gained 4.1% last week

Key Insights

• China National Building Material's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 53% of the business is held by the top 3 shareholders
• Institutions own 15% of China National Building Material

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If you want to know who really controls China National Building Material Company Limited (HKG:3323), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private companies with 34% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, private companies benefitted the most after the company's market cap rose by HK$1.3b last week.

In the chart below, we zoom in on the different ownership groups of China National Building Material.

View our latest analysis for China National Building Material

What Does The Institutional Ownership Tell Us About China National Building Material?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that China National Building Material does have institutional investors; and they hold a good portion of the company's stock. 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 National Building Material's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in China National Building Material. China National Building Material Group Co., Ltd. is currently the largest shareholder, with 30% of shares outstanding. For context, the second largest shareholder holds about 20% of the shares outstanding, followed by an ownership of 3.5% by the third-largest shareholder.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 53% stake.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of China National Building Material

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 data cannot confirm that board members are holding shares personally. It is rare to see such a low level of personal ownership, amongst the board (and it is possible that our data might be incomplete). Concerned investors should check here to see if insiders have been selling or buying.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in China National Building Material. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 34%, of the China National Building Material stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

We can see that public companies hold 20% of the China National Building Material shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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. Take risks for example - China National Building Material has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.