It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in Hong Fok Corporation Limited (SGX:H30).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Hong Fok
In the last twelve months, the biggest single purchase by an insider was when Joint CEO & Director Sim Eng Cheong bought S$3.7m worth of shares at a price of S$0.75 per share. That implies that an insider found the current price of S$0.81 per share to be enticing. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it’s less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. The good news for Hong Fok share holders is that insiders were buying at near the current price.
While Hong Fok insiders bought shares last year, they didn’t sell. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Hong Fok is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Hong Fok Have Bought Stock Recently
It’s good to see that Hong Fok insiders have made notable investments in the company’s shares. We can see that Joint CEO & Director Sim Eng Cheong paid S$103k for shares in the company. No-one sold. This could be interpreted as suggesting a positive outlook.
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Hong Fok insiders own 33% of the company, currently worth about S$238m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Hong Fok Insider Transactions Indicate?
It’s certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Hong Fok. One for the watchlist, at least! To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
But note: Hong Fok may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.