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
- 50% of the business is held by the top 7 shareholders
- Institutions own 29% of HUTCHMED (China)
Every investor in HUTCHMED (China) Limited (LON:HCM) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 39% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
As a result, private equity firms collectively scored the highest last week as the company hit UK£2.0b market cap following a 3.8% gain in the stock.
Let’s delve deeper into each type of owner of HUTCHMED (China), beginning with the chart below.
View 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 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 HUTCHMED (China), (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 HUTCHMED (China). Hutchison Whampoa (China) Limited is currently the company’s largest shareholder with 39% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 2.5% and 2.3%, of the shares outstanding, respectively.
We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
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.
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.
We can see that insiders own shares in HUTCHMED (China) Limited. This is a big company, so it is good to see this level of alignment. Insiders own UK£23m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
The general public– including retail investors — own 31% stake in the company, and hence can’t easily be ignored. 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 Equity Ownership
With a stake of 39%, private equity firms could influence the HUTCHMED (China) board. 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:
It’s always worth thinking about the different groups who own shares in a company. But to understand HUTCHMED (China) better, we need to consider many other factors. For instance, we’ve identified 1 warning sign for HUTCHMED (China) that you should be aware of.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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.
Valuation is complex, but we’re helping make it simple.
Find out whether HUTCHMED (China) is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
