Read This Before Selling Ausnutria Dairy Corporation Ltd (HKG:1717) Shares

We often see insiders buying up shares in companies that perform well over the long term. 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 Ausnutria Dairy Corporation Ltd (HKG:1717), you may well want to know whether insiders have been buying or selling.

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.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

Check out our latest analysis for Ausnutria Dairy

The Last 12 Months Of Insider Transactions At Ausnutria Dairy

In the last twelve months, the biggest single purchase by an insider was when Executive Director Siu Hung Ng bought HK$15m worth of shares at a price of HK$15.10 per share. That means that even when the share price was higher than HK$13.00 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Siu Hung Ng was the only individual insider to buy during the last year.

The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Ausnutria Dairy is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Does Ausnutria Dairy Boast High 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Ausnutria Dairy insiders own about HK$3.2b worth of shares (which is 14% of the company). 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 Ausnutria Dairy 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, Ausnutria Dairy insiders feel good about the company's future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Ausnutria Dairy has 1 warning sign and it would be unwise to ignore it.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.

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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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