Need To Know: Dragon Mining Limited (HKG:1712) Insiders Have Been Selling Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Dragon Mining Limited (HKG:1712), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

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. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

View our latest analysis for Dragon Mining

Dragon Mining Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, Yau Cheung Lau, for HK$39m worth of shares, at about HK$2.30 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is HK$1.74. So it may not shed much light on insider confidence at current levels. Notably Yau Cheung Lau was also the biggest buyer, having purchased HK$17m worth of shares.

In total, Dragon Mining insiders sold more than they bought over the last year. The chart below shows insider transactions (by 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!

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Does Dragon Mining 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. We usually like to see fairly high levels of insider ownership. Our data isn't picking up on much insider ownership at Dragon Mining, though insiders do hold about HK$978k 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 Does This Data Suggest About Dragon Mining Insiders?

The fact that there have been no Dragon Mining insider transactions recently certainly doesn't bother us. Our analysis of Dragon Mining insider transactions leaves us unenthusiastic. We also note that, as far as we can see, insider ownership is fairly low, compared to other companies. Along with insider transactions, I recommend checking if Dragon Mining is growing revenue. This free chart of historic revenue and earnings should make that easy.

But note: Dragon Mining 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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