Daqo New Energy Corp. (NYSE:DQ) institutional owners may be pleased with recent gains after 44% loss over the past year

Key Insights

• Significantly high institutional ownership implies Daqo New Energy's stock price is sensitive to their trading actions
• The top 12 shareholders own 51% of the company
• Insider ownership in Daqo New Energy is 25%

Every investor in Daqo New Energy Corp. (NYSE:DQ) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 65% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors would appreciate the 6.7% increase in share prices last week, given their one-year returns have been disappointing at 44%.

In the chart below, we zoom in on the different ownership groups of Daqo New Energy.

See our latest analysis for Daqo New Energy

What Does The Institutional Ownership Tell Us About Daqo New Energy?

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.

Daqo New Energy already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Daqo New Energy's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Daqo New Energy. Our data suggests that Guangfu Xu, who is also the company's Top Key Executive, holds the most number of shares at 10%. 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. For context, the second largest shareholder holds about 8.0% of the shares outstanding, followed by an ownership of 6.1% by the third-largest shareholder. Furthermore, CEO Longgen Zhang is the owner of 2.9% of the company's shares.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Daqo New Energy

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

It seems insiders own a significant proportion of Daqo New Energy Corp.. It has a market capitalization of just US$3.1b, and insiders have US$772m worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 10% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Daqo New Energy. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Daqo New Energy is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.