We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Hengan International Group Company Limited (HKG:1044), 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 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.’
The Last 12 Months Of Insider Transactions At Hengan International Group
In the last twelve months, the biggest single purchase by an insider was when Executive Director Wong Sze bought HK$43m worth of shares at a price of HK$61.85 per share. That means that even when the share price was higher, an insider wanted to purchase shares. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. It’s not at all bad to see insiders buy shares at or above current prices. Wong Sze was the only buyer over the year.
You can see the insider transactions 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!
Hengan International Group is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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. Hengan International Group insiders own about HK$3.9b worth of shares (which is 41% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Hengan International Group Insiders?
It’s certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Hengan International Group. That’s what I like to see! 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.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.