Could The Fanhua Inc. (NASDAQ:FANH) Ownership Structure Tell Us Something Useful?
Simply Wall St
5 min read
A look at the shareholders of Fanhua Inc. (NASDAQ:FANH) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.
With a market capitalization of US$715m, Fanhua is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Fanhua.
NasdaqGS:FANH Ownership Breakdown October 10th 2021
What Does The Institutional Ownership Tell Us About Fanhua?
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 have a fair amount of stake in Fanhua. 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. 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 Fanhua, (below). Of course, keep in mind that there are other factors to consider, too.
NasdaqGS:FANH Earnings and Revenue Growth October 10th 2021
Hedge funds don't have many shares in Fanhua. From our data, we infer that the largest shareholder is Yinan Hu (who also holds the title of Top Key Executive) with 19% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. Bank of America Corporation, Asset Management Arm is the second largest shareholder owning 4.7% of common stock, and Peng Ge holds about 4.5% of the company stock. Interestingly, the third-largest shareholder, Peng Ge is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of Fanhua
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 most recent data indicates that insiders own a reasonable proportion of Fanhua Inc.. It has a market capitalization of just US$715m, and insiders have US$165m 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 47% stake in Fanhua. 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.
Private Company Ownership
It seems that Private Companies own 3.7%, of the Fanhua stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
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 1 warning sign with Fanhua , and understanding them should be part of your investment process.
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.
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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