Read This Before Buying Li Bao Ge Group Limited (HKG:1869) Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell Li Bao Ge Group Limited (HKG:1869), you may well want to know whether insiders have been buying or selling.

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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

Check out our latest analysis for Li Bao Ge Group

The Last 12 Months Of Insider Transactions At Li Bao Ge Group

The insider, Ka Wai Wong, made the biggest insider sale in the last 12 months. That single transaction was for HK$12m worth of shares at a price of HK$0.21 each. That means that an insider was selling shares at slightly below the current price (HK$0.28). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was 80% of Ka Wai Wong's holding.

Over the last year we saw more insider selling of Li Bao Ge Group shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

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

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Our data suggests Li Bao Ge Group insiders own 4.2% of the company, worth about HK$12m. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We prefer to see high levels of insider ownership.

So What Does This Data Suggest About Li Bao Ge Group Insiders?

The fact that there have been no Li Bao Ge Group insider transactions recently certainly doesn't bother us. We don't take much encouragement from the transactions by Li Bao Ge Group insiders. But we do like the fact that insiders own a fair chunk of the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Li Bao Ge Group has 2 warning signs (and 1 which is significant) we think you should know about.

Of course Li Bao Ge Group 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, 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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