Should You Take Comfort From Insider Transactions At China New Higher Education Group Limited (HKG:2001)?

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 shareholders might well want to know whether insiders have been buying or selling shares in China New Higher Education Group Limited (HKG:2001).

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, rules govern insider transactions, and certain disclosures are required.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’

See our latest analysis for China New Higher Education Group

The Last 12 Months Of Insider Transactions At China New Higher Education Group

Chairman Xiaoxuan Li made the biggest insider purchase in the last 12 months. That single transaction was for HK$3.2m worth of shares at a price of HK$2.70 each. That means that an insider was happy to buy shares at above the current price of HK$2.56. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. To us, it’s very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Xiaoxuan Li was the only individual insider to buy over the year.

Xiaoxuan Li bought a total of 3.0m shares over the year at an average price of HK$2.93. You can see the insider transactions (by 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:2001 Recent Insider Trading, August 18th 2019
SEHK:2001 Recent Insider Trading, August 18th 2019

Insider Ownership of China New Higher Education Group

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It’s great to see that China New Higher Education Group insiders own 33% of the company, worth about HK$1.3b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At China New Higher Education Group Tell Us?

It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about China New Higher Education Group. Nice! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

But note: China New Higher Education 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.