Did Yuanda China Holdings Limited (HKG:2789) Insiders Buy Up More Shares?

By
Simply Wall St
Published
November 19, 2020

We often see insiders buying up shares in companies that perform well over the long term. 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 Yuanda China Holdings Limited (HKG:2789).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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'.

See our latest analysis for Yuanda China Holdings

Yuanda China Holdings Insider Transactions Over The Last Year

Notably, that recent purchase by Founder & Chairman Baohua Kang was not the only time they bought Yuanda China Holdings shares this year. Earlier in the year, they paid HK$0.06 per share in a HK$271k purchase. That means that an insider was happy to buy shares at around the current price of HK$0.062. 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. Happily, the Yuanda China Holdings insider decided to buy shares at close to current prices. The only individual insider to buy over the last year was Baohua Kang. We note that Baohua Kang was also the biggest seller.

Baohua Kang bought a total of 66.18m shares over the year at an average price of HK$0.06. 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!

SEHK:2789 Insider Trading Volume November 20th 2020

Yuanda China Holdings 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.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Yuanda China Holdings insiders own about HK$226m worth of shares (which is 60% of the company). 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 Yuanda China Holdings Insider Transactions Indicate?

It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Yuanda China Holdings insiders are well aligned, and quite possibly think the share price is too low. Looks promising! 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. To help with this, we've discovered 2 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Yuanda China Holdings.

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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