Should You Take Comfort From Insider Transactions At Huanxi Media Group Limited (HKG:1003)?

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 shareholders might well want to know whether insiders have been buying or selling shares in Huanxi Media Group Limited (HKG:1003).

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, 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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

Check out our latest analysis for Huanxi Media Group

The Last 12 Months Of Insider Transactions At Huanxi Media Group

In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board Ping Dong bought HK$9.2m worth of shares at a price of HK$1.20 per share. We do like to see buying, but this purchase was made at well below the current price of HK$2.47. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

Ping Dong bought a total of 20.02m shares over the year at an average price of HK$1.31. You can see the insider transactions (by companies and 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!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Does Huanxi Media Group 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Huanxi Media Group insiders own 43% of the company, currently worth about HK$3.7b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Huanxi Media Group Insiders?

It doesn't really mean much that no insider has traded Huanxi Media Group shares in the last quarter. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, Huanxi Media Group insiders feel good about the company's future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 2 warning signs with Huanxi Media Group and understanding these should be part of your investment process.

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, 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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