Every investor in Li & Fung Limited (HKG:494) should be aware of the most powerful shareholder groups. 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$12b, Li & Fung is a decent size, so it is probably on the radar of institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about 494.
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What Does The Institutional Ownership Tell Us About Li & Fung?
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.
As you can see, institutional investors own 39% of Li & Fung. 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 Li & Fung, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don’t have a meaningful investment in Li & Fung. 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 Li & Fung
The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Shareholders would probably be interested to learn that insiders own shares in Li & Fung Limited. This is a big company, so it is good to see this level of alignment. Insiders own HK$657m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.