Retail investors invested in China Airlines, Ltd. (TWSE:2610) copped the brunt of last week's NT$5.4b market cap decline

Key Insights

• The considerable ownership by retail investors in China Airlines indicates that they collectively have a greater say in management and business strategy
• A total of 25 investors have a majority stake in the company with 50% ownership
• 11% of China Airlines is held by Institutions

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Every investor in China Airlines, Ltd. (TWSE:2610) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are retail investors with 49% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 3.7% decline in share price, retail investors suffered the most losses.

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

View our latest analysis for China Airlines

What Does The Institutional Ownership Tell Us About China Airlines?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in China Airlines. 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 China Airlines, (below). Of course, keep in mind that there are other factors to consider, too.

China Airlines is not owned by hedge funds. Our data shows that China Aviation Development Foundation is the largest shareholder with 31% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.6% and 2.1%, of the shares outstanding, respectively.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of China Airlines

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our information suggests that China Airlines, Ltd. insiders own under 1% of the company. 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 NT$29m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 49% ownership, the general public, mostly comprising of individual investors, have some degree of sway over China Airlines. 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 Equity Ownership

Private equity firms hold a 8.6% stake in China Airlines. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

We can see that Private Companies own 31%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China Airlines better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for China Airlines you should be aware of, and 1 of them is potentially serious.

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.