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Do Insiders Own Lots Of Shares In China Renewable Energy Investment Limited (HKG:987)?

Simply Wall St

Every investor in China Renewable Energy Investment Limited (HKG:987) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.'

China Renewable Energy Investment is a smaller company with a market capitalization of HK$494m, so it may still be flying under the radar of 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 987.

Check out our latest analysis for China Renewable Energy Investment

SEHK:987 Ownership Summary, July 25th 2019

What Does The Lack Of Institutional Ownership Tell Us About China Renewable Energy Investment?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. 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. China Renewable Energy Investment's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

SEHK:987 Income Statement, July 25th 2019

China Renewable Energy Investment is not owned by hedge funds. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of China Renewable Energy Investment

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 information suggests that insiders maintain a significant holding in China Renewable Energy Investment Limited. It has a market capitalization of just HK$494m, and insiders have HK$93m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public holds a 25% stake in 987. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Public Company Ownership

We can see that public companies hold 56%, of the 987 shares on issue. We can't be certain, but this 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.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.