Key Insights

• Significantly high institutional ownership implies Yum China Holdings' stock price is sensitive to their trading actions
• The top 18 shareholders own 50% of the company
• Recent sales by insiders

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To get a sense of who is truly in control of Yum China Holdings, Inc. (NYSE:YUMC), 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 88% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

Let's delve deeper into each type of owner of Yum China Holdings, beginning with the chart below.

See our latest analysis for Yum China Holdings

What Does The Institutional Ownership Tell Us About Yum China Holdings?

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 Yum China Holdings does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Yum China Holdings' 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. Hedge funds don't have many shares in Yum China Holdings. Looking at our data, we can see that the largest shareholder is JP Morgan Asset Management with 5.3% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.7% and 4.6%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 18 shareholders, meaning that no single shareholder has a majority interest in the ownership.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Yum China Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 most recent data indicates that insiders own less than 1% of Yum China Holdings, Inc.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$78m of stock. 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 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Yum China Holdings. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Yum China Holdings .

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.