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Could Putian Communication Group Limited’s (HKG:1720) Investor Composition Influence The Stock Price?

Mercedes Harden

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A look at the shareholders of Putian Communication Group Limited (HKG:1720) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. 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.’

With a market capitalization of HK$3.2b, Putian Communication Group is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutions are not on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about 1720.

Check out our latest analysis for Putian Communication Group

SEHK:1720 Ownership Summary, February 25th 2019

What Does The Lack Of Institutional Ownership Tell Us About Putian Communication Group?

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 fund under management, so the institition 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. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Putian Communication Group, for yourself, below.

SEHK:1720 Income Statement, February 25th 2019

Hedge funds don’t have many shares in Putian Communication Group. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Putian Communication Group

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 own more than half of Putian Communication Group Limited. This gives them effective control of the company. Given it has a market cap of HK$3.2b, that means they have HK$2.2b worth of shares. 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 30% ownership, the general public have some degree of sway over 1720. 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.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.