Should You Take Comfort From Insider Transactions At Zijin Mining Group Company Limited (HKG:2899)?

By
Simply Wall St
Published
March 08, 2021
SEHK:2899

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 before you buy or sell Zijin Mining Group Company Limited (HKG:2899), 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 don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.

Check out our latest analysis for Zijin Mining Group

Zijin Mining Group Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Executive Chairman of the Board Jinghe Chen for HK$16m worth of shares, at about HK$5.48 per share. Even though the purchase was made at a significantly lower price than the recent price (HK$9.98), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

Jinghe Chen bought a total of 5.00m shares over the year at an average price of HK$5.49. 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!

insider-trading-volume
SEHK:2899 Insider Trading Volume March 9th 2021

Zijin Mining Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Zijin Mining Group insiders own 0.4% of the company, currently worth about HK$1.3b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Zijin Mining Group Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like Zijin Mining Group insiders think the business has merit. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 2 warning signs with Zijin Mining Group and understanding these should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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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