Key Insights

• Significant control over Huarong International Financial Holdings by public companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 54% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

Every investor in Huarong International Financial Holdings Limited (HKG:993) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are public companies with 33% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, public companies collectively scored the highest last week as the company hit HK$1.2b market cap following a 18% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Huarong International Financial Holdings.

View our latest analysis for Huarong International Financial Holdings

What Does The Lack Of Institutional Ownership Tell Us About Huarong International Financial Holdings?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Huarong International Financial Holdings might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

We note that hedge funds don't have a meaningful investment in Huarong International Financial Holdings. Our data shows that China CITIC Financial Asset Management Co., Ltd. is the largest shareholder with 33% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 21% and 11%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Huarong International Financial Holdings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in Huarong International Financial Holdings Limited. It has a market capitalization of just HK$1.2b, and insiders have HK$88m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Huarong International Financial Holdings. 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

With a stake of 21%, private equity firms could influence the Huarong International Financial Holdings board. 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

It seems that Private Companies own 13%, of the Huarong International Financial Holdings stock. 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.

Public Company Ownership

Public companies currently own 33% of Huarong International Financial Holdings stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Huarong International Financial Holdings (1 is concerning!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.