Insiders Who Purchased CN¥28.4m Of Reach New Holdings Stock May Not Have Expected 21% Tumble

The recent price decline of 21% in Reach New Holdings Limited's (HKG:8471) stock may have disappointed insiders who bought CN¥28.4m worth of shares at an average price of CN¥0.13 in the past 12 months. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth CN¥24.2m, which is not what they expected.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Reach New Holdings

The Last 12 Months Of Insider Transactions At Reach New Holdings

The CEO & Executive Director Rongsheng Li made the biggest insider purchase in the last 12 months. That single transaction was for HK$18m worth of shares at a price of HK$0.20 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.11). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

In the last twelve months insiders purchased 220.00m shares for HK$28m. On the other hand they divested 200.00m shares, for HK$16m. In the last twelve months there was more buying than selling by Reach New Holdings insiders. They paid about HK$0.13 on average. This is nice to see since it implies that insiders might see value around current prices. 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!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Does Reach New Holdings Boast High Insider Ownership?

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. Reach New Holdings insiders own 48% of the company, currently worth about HK$50m 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.

So What Does This Data Suggest About Reach New Holdings Insiders?

It doesn't really mean much that no insider has traded Reach New Holdings shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Reach New Holdings insiders feel good about the company's future. 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. For instance, we've identified 4 warning signs for Reach New Holdings (2 are a bit unpleasant) you should be aware of.

Of course Reach New Holdings may not be the best stock to buy. So you may wish to see this free collection of high quality 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 of direct interests only, but not derivative transactions or indirect interests.

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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.