We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in GTI Holdings Limited (HKG:3344).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
GTI Holdings Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Chairman of the Board Sum Poon for HK$57m worth of shares, at about HK$0.35 per share. That means that even when the share price was below the current price of HK$0.38, an insider wanted to cash in some shares. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. As a general rule we consider it to be discouraging when insiders are selling below the current price. It is worth noting that this sale was only 4.4% of Sum Poon’s holding. Sum Poon was the only individual insider to sell shares in the last twelve months. Notably Sum Poon was also the biggest buyer, having purchased HK$2.6m worth of shares.
Sum Poon ditched 360.00m shares over the year. The average price per share was HK$0.28. You can see a visual depiction of insider transactions over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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 of GTI Holdings
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. It’s great to see that GTI Holdings insiders own 78% of the company, worth about HK$1.6b. 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 GTI Holdings Tell Us?
An insider sold stock recently, but they haven’t been buying. And our longer term analysis of insider transactions didn’t bring confidence, either. 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. Along with insider transactions, I recommend checking if GTI Holdings is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course GTI Holdings may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.