Hokuetsu Corporation's (TSE:3865) 5.1% loss last week hit both individual investors who own 38% as well as institutions

Key Insights

• The considerable ownership by retail investors in Hokuetsu indicates that they collectively have a greater say in management and business strategy
• A total of 8 investors have a majority stake in the company with 50% ownership
• Institutions own 22% of Hokuetsu

We've discovered 1 warning sign about Hokuetsu. View them for free.

To get a sense of who is truly in control of Hokuetsu Corporation (TSE:3865), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 38% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of retail investors took a hit after last week’s 5.1% price drop, institutions with their 22% holdings also suffered.

Let's take a closer look to see what the different types of shareholders can tell us about Hokuetsu.

View our latest analysis for Hokuetsu

What Does The Institutional Ownership Tell Us About Hokuetsu?

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 Hokuetsu 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Hokuetsu's earnings history below. Of course, the future is what really matters.

It would appear that 11% of Hokuetsu shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is Misuga Kaiun Co., Ltd. with 11% of shares outstanding. With 11% and 10.0% of the shares outstanding respectively, Oasis Management Company Ltd. and Daio Kaiun Co.,Ltd. are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Hokuetsu

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of Hokuetsu Corporation. But they may have an indirect interest through a corporate structure that we haven't picked up on. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around JP¥493m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 38% stake in the company, and hence can't easily be ignored. 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 21%, 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.

Public Company Ownership

We can see that public companies hold 3.6% of the Hokuetsu shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Hokuetsu , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.