Positive week for Daqo New Energy Corp. (NYSE:DQ) institutional investors who lost 36% over the past year

By
Simply Wall St
Published
May 24, 2022
NYSE:DQ
Source: Shutterstock

To get a sense of who is truly in control of Daqo New Energy Corp. (NYSE:DQ), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 60% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

After a year of 36% losses, last week’s 15% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.

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

Check out our latest analysis for Daqo New Energy

ownership-breakdown
NYSE:DQ Ownership Breakdown May 24th 2022

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.

We can see that Daqo New Energy does have institutional investors; and they hold a good portion of the company's stock. 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. 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.

earnings-and-revenue-growth
NYSE:DQ Earnings and Revenue Growth May 24th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Daqo New Energy is not owned by hedge funds. From our data, we infer that the largest shareholder is Guangfu Xu (who also holds the title of Top Key Executive) with 11% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. In comparison, the second and third largest shareholders hold about 8.3% and 7.9% of the stock. In addition, we found that Longgen Zhang, the CEO has 2.5% of the shares allocated to their name.

On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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

Insider Ownership Of Daqo New Energy

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.

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 information suggests that insiders maintain a significant holding in Daqo New Energy Corp.. It is very interesting to see that insiders have a meaningful US$793m stake in this US$3.5b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 17% stake in Daqo New Energy. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Daqo New Energy , and understanding them should be part of your investment process.

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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