If you want to know who really controls China XD Plastics Company Limited (NASDAQ:CXDC), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes 'a business with enduring competitive advantages that is run by able and owner-oriented people'. So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.
China XD Plastics is not a large company by global standards. It has a market capitalization of US$102m, which means it wouldn't have the attention of many institutional investors. In the chart below below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about CXDC.
What Does The Institutional Ownership Tell Us About China XD Plastics?
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.
We can see that China XD Plastics does have institutional investors; and they hold 8.0% of the 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 China XD Plastics's historic earnings and revenue, below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in China XD Plastics. 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 XD Plastics
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.
Our information suggests that insiders own more than half of China XD Plastics Company Limited. This gives them effective control of the company. That means they own US$66m worth of shares in the US$102m company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.
General Public Ownership
The general public, with a 28% stake in the company, will not easily be ignored. 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.
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.
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.
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