Read This Before Buying Sinopharm Group Co., Ltd. (HKG:1099) Shares

By
Simply Wall St
Published
December 15, 2020

It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Sinopharm Group Co., Ltd. (HKG:1099).

Do Insider Transactions Matter?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

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'.

See our latest analysis for Sinopharm Group

Sinopharm Group Insider Transactions Over The Last Year

The Executive Chairman, Zhiming Li, made the biggest insider sale in the last 12 months. That single transaction was for HK$1.6m worth of shares at a price of HK$17.73 each. That means that even when the share price was below the current price of HK$18.92, an insider wanted to cash in some shares. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was 51% of Zhiming Li's stake.

Sinopharm Group insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

SEHK:1099 Insider Trading Volume December 15th 2020

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

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. A high insider ownership often makes company leadership more mindful of shareholder interests. Our information indicates that Sinopharm Group insiders own about HK$4.9m worth of shares. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It's always possible we are missing something but from our data, it looks like insider ownership is minimal.

So What Do The Sinopharm Group Insider Transactions Indicate?

The fact that there have been no Sinopharm Group insider transactions recently certainly doesn't bother us. The insider transactions at Sinopharm Group are not inspiring us to buy. And we're not picking up on high enough insider ownership to give us any comfort. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 2 warning signs for Sinopharm Group you should be aware of, and 1 of these doesn't sit too well with us.

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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