It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Shengjing Bank Co., Ltd. (HKG:2066).
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
The Last 12 Months Of Insider Transactions At Shengjing Bank
Over the last year, we can see that the biggest insider purchase was by insider Chung Kiu Cheung for HK$737m worth of shares, at about HK$30.53 per share. That means that even when the share price was higher than HK$7.10 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. We always take careful note of the price insiders pay when purchasing shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Chung Kiu Cheung was the only individual insider to buy during the last year. We note that Chung Kiu Cheung was both the biggest buyer and the biggest seller.
Chung Kiu Cheung bought a total of 169.15m shares over the year at an average price of HK$9.54. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Shengjing Bank is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Shengjing Bank insiders own 13% of the company, currently worth about HK$8.0b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Shengjing Bank Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded Shengjing Bank shares in the last quarter. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Shengjing Bank insiders think the business has merit. So while it’s helpful to know what insiders are doing in terms of buying or selling, it’s also helpful to know the risks that a particular company is facing. For example – Shengjing Bank has 2 warning signs we think you should be aware of.
Of course Shengjing Bank may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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This article by Simply Wall St is general in nature. 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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