We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in Chongqing Iron & Steel Company Limited (HKG:1053).
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, 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
Chongqing Iron & Steel Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Hung Sang Ng for HK$5.7m worth of shares, at about HK$1.14 per share. That means that even when the share price was higher than HK$0.68 (the recent price), 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. We always take careful note of the price insiders pay when purchasing shares. 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. The only individual insider to buy over the last year was Hung Sang Ng. We note that Hung Sang Ng was both the biggest buyer and the biggest seller.
Hung Sang Ng ditched 13342000 shares over the year. The average price per share was CN¥0.80. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Chongqing Iron & Steel Have Sold Stock Recently
The last quarter saw substantial insider selling of Chongqing Iron & Steel shares. Specifically, insider Hung Sang Ng ditched HK$4.6m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the insiders think that the shares are a bargain.
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Insiders own 0.4% of Chongqing Iron & Steel shares, worth about HK$43m, according to our data. But they may have an indirect interest through a corporate structure that we haven’t picked up on. Overall, this level of ownership isn’t that impressive, but it’s certainly better than nothing!
So What Do The Chongqing Iron & Steel Insider Transactions Indicate?
An insider sold stock recently, but they haven’t been buying. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. So we’d only buy after careful consideration. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. Every company has risks, and we’ve spotted 3 warning signs for Chongqing Iron & Steel you should know about.
But note: Chongqing Iron & Steel may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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. Thank you for reading.