Lotes Co., Ltd's (TWSE:3533) institutional investors lost 3.1% over the past week but have profited from longer-term gains

Key Insights

• Significantly high institutional ownership implies Lotes' stock price is sensitive to their trading actions
• 52% of the business is held by the top 14 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Lotes Co., Ltd (TWSE:3533), it is important to understand the ownership structure of the business. With 41% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 3.1% last week. However, the 97% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

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

See our latest analysis for Lotes

What Does The Institutional Ownership Tell Us About Lotes?

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.

As you can see, institutional investors have a fair amount of stake in Lotes. 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 Lotes' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Lotes. Jinling Investment Co. Ltd is currently the largest shareholder, with 9.8% of shares outstanding. For context, the second largest shareholder holds about 8.8% of the shares outstanding, followed by an ownership of 4.5% by the third-largest shareholder.

After doing some more digging, we found that the top 14 have the combined ownership of 52% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Lotes

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our most recent data indicates that insiders own less than 1% of Lotes Co., Ltd. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Keep in mind that it's a big company, and the insiders own NT$893m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in Lotes. 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

We can see that Private Companies own 26%, of the shares on issue. 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 Lotes better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Lotes you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.

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