The big shareholder groups in China Magnesium Corporation Limited (ASX:CMC) have power over the company. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. 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 Magnesium is not a large company by global standards. It has a market capitalization of AU$10m, which means it wouldn’t have the attention of many institutional investors. In the chart below below, we can see that institutions don’t own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about CMC.
See our latest analysis for China Magnesium
What Does The Lack Of Institutional Ownership Tell Us About China Magnesium?
Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.
There are multiple explanations for why institutions don’t own a stock. The most common is that the company is too small relative to fund under management, so the institition does not bother to look closely at the company. It is also possible that fund managers don’t own the stock because they aren’t convinced it will perform well. China Magnesium’s earnings and revenue track record (below) may not be compelling to institutional investors — or they simply might not have looked at the business closely.
Hedge funds don’t have many shares in China Magnesium. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of China Magnesium
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.
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.
It seems insiders own a significant proportion of China Magnesium Corporation Limited. It has a market capitalization of just AU$10m, and insiders have AU$4.9m worth of shares in their own names. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.