Hopeful Week For Insiders Who Bought CN¥40.1m Of Shanghai Chicmax Cosmetic Stock

Insiders who bought CN¥40.1m worth of Shanghai Chicmax Cosmetic Co., Ltd. (HKG:2145) stock in the last year recovered part of their losses as the stock rose by 12% last week. However, the purchase is proving to be an expensive wager as insiders are yet to get ahead of their losses which currently stand at CN¥4.8m since the time of purchase.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Shanghai Chicmax Cosmetic

The Last 12 Months Of Insider Transactions At Shanghai Chicmax Cosmetic

Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Yan Luo for HK$12m worth of shares, at about HK$40.51 per share. That means that an insider was happy to buy shares at above the current price of HK$34.95. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months Shanghai Chicmax Cosmetic insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Shanghai Chicmax Cosmetic Insiders Bought Stock Recently

It's good to see that Shanghai Chicmax Cosmetic insiders have made notable investments in the company's shares. In total, insiders bought HK$4.8m worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.

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. It's great to see that Shanghai Chicmax Cosmetic insiders own 40% of the company, worth about HK$5.6b. 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 Do The Shanghai Chicmax Cosmetic Insider Transactions Indicate?

It is good to see recent purchasing. And an analysis of the transactions over the last year also gives us confidence. When combined with notable insider ownership, these factors suggest Shanghai Chicmax Cosmetic insiders are well aligned, and quite possibly think the share price is too low. Nice! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we found 1 warning sign for Shanghai Chicmax Cosmetic that deserve your attention before buying any shares.

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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.