While Texhong Textile Group Limited (HKG:2678) shareholders have enjoyed a good week with stock up 8.2%, they need remain vigilant. In spite of the relatively cheap prices, insiders made the decision to sell CN¥18m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.
The Last 12 Months Of Insider Transactions At Texhong Textile Group
The COO & Executive Director Daoping Tang made the biggest insider purchase in the last 12 months. That single transaction was for HK$8.7m worth of shares at a price of HK$8.70 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of HK$12.10. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
All up, insiders sold more shares in Texhong Textile Group than they bought, over the last year. 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Texhong Textile Group Insiders Are Selling The Stock
The last three months saw significant insider selling at Texhong Textile Group. In total, Company Secretary & Executive Director Tsz Wai Hui sold HK$2.3m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Texhong Textile Group
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Texhong Textile Group insiders own 51% of the company, currently worth about HK$5.7b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Texhong Textile Group Tell Us?
An insider sold Texhong Textile Group shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. But since Texhong Textile Group is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For example - Texhong Textile Group has 3 warning signs we think you should be aware of.
But note: Texhong Textile Group 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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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.
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