Yahoo Finance HUTCHMED (China) Limited's (LON:HCM) 10% loss last week hit both individual investors who own 45% as well as institutions
Key Insights
The considerable ownership by private equity firms in HUTCHMED (China) indicates that they collectively have a greater say in management and business strategy
The top 4 shareholders own 54% of the company
If you want to know who really controls HUTCHMED (China) Limited (LON:HCM), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private equity firms with 45% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
While the holdings of private equity firms took a hit after last week’s 10% price drop, institutions with their 33% holdings also suffered.
In the chart below, we zoom in on the different ownership groups of HUTCHMED (China).
Check out our latest analysis for HUTCHMED (China)
What Does The Institutional Ownership Tell Us About HUTCHMED (China)?
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 have a fair amount of stake in HUTCHMED (China). 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at HUTCHMED (China)'s earnings history below. Of course, the future is what really matters.
HUTCHMED (China) is not owned by hedge funds. Hutchison Whampoa (China) Limited is currently the largest shareholder, with 39% of shares outstanding. For context, the second largest shareholder holds about 5.4% of the shares outstanding, followed by an ownership of 4.8% by the third-largest shareholder.
To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 HUTCHMED (China)
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.
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.
We can report that insiders do own shares in HUTCHMED (China) Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around UK£41m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 20% stake in HUTCHMED (China). 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.
Private Equity Ownership
With an ownership of 45%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with HUTCHMED (China) , and understanding them should be part of your investment process.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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