It is not uncommon to see companies perform well in the years after insiders buy shares. 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 China International Capital Corporation Limited (HKG:3908).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
China International Capital Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when CEO & Executive Director Zhaohui Huang bought HK$3.7m worth of shares at a price of HK$12.62 per share. We do like to see buying, but this purchase was made at well below the current price of HK$23.05. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
China International Capital is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that China International Capital insiders own 0.3% of the company, worth about HK$759m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At China International Capital Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, China International Capital 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 example, China International Capital has 2 warning signs (and 1 which is significant) we think you should know about.
Of course China International Capital 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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