How Much Are Fountain Set (Holdings) Limited (HKG:420) Insiders Taking Off The Table?

We often see insiders buying up shares in companies that perform well over the long term. 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 Fountain Set (Holdings) Limited (HKG:420).

What Is Insider Buying?

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, such insiders must disclose their trading activities, and not trade on inside information.

Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.

View our latest analysis for Fountain Set (Holdings)

Fountain Set (Holdings) Insider Transactions Over The Last Year

The Founder & Honorary Chairman, Chung Fong Ha, made the biggest insider sale in the last 12 months. That single transaction was for HK$138m worth of shares at a price of HK$1.50 each. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (HK$0.88). So it may not tell us anything about how insiders feel about the current share price.

Happily, we note that in the last year insiders paid HK$44m for 36.56m shares. But they sold 161.97m shares for HK$234m. Over the last year we saw more insider selling of Fountain Set (Holdings) shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
SEHK:420 Insider Trading Volume August 25th 2020

I will like Fountain Set (Holdings) better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insider Ownership of Fountain Set (Holdings)

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. It appears that Fountain Set (Holdings) insiders own 14% of the company, worth about HK$153m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About Fountain Set (Holdings) Insiders?

It doesn’t really mean much that no insider has traded Fountain Set (Holdings) shares in the last quarter. It’s great to see high levels of insider ownership, but looking back over the last year, we don’t gain confidence from the Fountain Set (Holdings) insiders selling. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Fountain Set (Holdings). At Simply Wall St, we found 2 warning signs for Fountain Set (Holdings) that deserve your attention before buying any shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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