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Could CNQC International Holdings Limited's (HKG:1240) Investor Composition Influence The Stock Price?

Simply Wall St

Every investor in CNQC International Holdings Limited (HKG:1240) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

CNQC International Holdings is not a large company by global standards. It has a market capitalization of HK$2.0b, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about 1240.

See our latest analysis for CNQC International Holdings

SEHK:1240 Ownership Summary, November 8th 2019

What Does The Institutional Ownership Tell Us About CNQC International Holdings?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

CNQC International Holdings already has institutions on the share registry. Indeed, they own 9.7% of the company. 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 CNQC International Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

SEHK:1240 Income Statement, November 8th 2019

Hedge funds don't have many shares in CNQC International Holdings. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of CNQC International Holdings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in CNQC International Holdings Limited. In their own names, insiders own HK$103m worth of stock in the HK$2.0b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds a 17% stake in 1240. 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 Company Ownership

Our data indicates that Private Companies hold 68%, of the company's shares. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.