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A look at the shareholders of China Evergrande Group (HKG:3333) can tell us which group is most powerful. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of 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.’
China Evergrande Group has a market capitalization of HK$323b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. In the chart below below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about 3333.
See our latest analysis for China Evergrande Group
What Does The Institutional Ownership Tell Us About China Evergrande Group?
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.
As you can see, institutional investors own 9.1% of China Evergrande Group. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 China Evergrande Group, (below). Of course, keep in mind that there are other factors to consider, too.
China Evergrande Group is not owned by hedge funds. 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 China Evergrande Group
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 Evergrande Group. This gives them effective control of the company. That means insiders have a very meaningful HK$258b stake in this HK$323b business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.