Stock Analysis

The recent 19% gain must have brightened Top Key Executive Yongliang Liu's week, Canggang Railway Limited's (HKG:2169) most bullish insider

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Key Insights

  • Canggang Railway's significant insider ownership suggests inherent interests in company's expansion
  • Yongliang Liu owns 66% of the company
  • Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

A look at the shareholders of Canggang Railway Limited (HKG:2169) can tell us which group is most powerful. The group holding the most number of shares in the company, around 70% to be precise, is individual insiders. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, insiders were the biggest beneficiaries of last week’s 19% gain.

In the chart below, we zoom in on the different ownership groups of Canggang Railway.

Check out our latest analysis for Canggang Railway

SEHK:2169 Ownership Breakdown March 29th 2023

What Does The Institutional Ownership Tell Us About Canggang Railway?

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.

As you can see, institutional investors have a fair amount of stake in Canggang Railway. 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 Canggang Railway's historic earnings and revenue below, but keep in mind there's always more to the story.

SEHK:2169 Earnings and Revenue Growth March 29th 2023

We note that hedge funds don't have a meaningful investment in Canggang Railway. Our data suggests that Yongliang Liu, who is also the company's Top Key Executive, holds the most number of shares at 66%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. With 8.8% and 5.7% of the shares outstanding respectively, China Life AMP Asset Management Co., Ltd. and Beijing Tianrun Botian Investment Management Co., Ltd. are the second and third largest shareholders. Additionally, the company's CEO Weiming Yi directly holds 3.6% of the total shares outstanding.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Canggang Railway

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 most recent data indicates that insiders own the majority of Canggang Railway Limited. This means they can collectively make decisions for the company. That means they own HK$1.9b worth of shares in the HK$2.7b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. 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.

Private Company Ownership

Our data indicates that Private Companies hold 5.7%, of the company's shares. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Canggang Railway (1 is potentially serious) that you should be aware of.

Of course this may not be the best stock to buy. So take a peek at this free 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.

Valuation is complex, but we're helping make it simple.

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