Luk Fook Holdings (International) Limited's (HKG:590) market cap dropped HK$616m last week; individual investors who hold 43% were hit as were institutions

Key Insights

• Luk Fook Holdings (International)'s significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 2 shareholders own 53% of the company
• Insiders have been selling lately

Every investor in Luk Fook Holdings (International) Limited (HKG:590) should be aware of the most powerful shareholder groups. With 43% stake, private companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 5.0% decrease in the stock price last week, private companies suffered the most losses, but institutions who own 32% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of Luk Fook Holdings (International).

See our latest analysis for Luk Fook Holdings (International)

What Does The Institutional Ownership Tell Us About Luk Fook Holdings (International)?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Luk Fook Holdings (International) already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Luk Fook Holdings (International), (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Luk Fook Holdings (International). Looking at our data, we can see that the largest shareholder is Luk Fook (Control) Limited with 40% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 13% and 8.0%, of the shares outstanding, respectively. Additionally, the company's CEO Wai Sheung Wong directly holds 1.6% of the total shares outstanding.

After doing some more digging, we found that the top 2 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Luk Fook Holdings (International)

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Shareholders would probably be interested to learn that insiders own shares in Luk Fook Holdings (International) Limited. This is a big company, so it is good to see this level of alignment. Insiders own HK$244m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 22% stake in Luk Fook Holdings (International). 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

Our data indicates that Private Companies hold 43%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Luk Fook Holdings (International) better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Luk Fook Holdings (International) .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.