It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Essex Bio-Technology Limited (HKG:1061), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Essex Bio-Technology Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Founder & Chairman Mia Je Ngiam bought HK$640k worth of shares at a price of HK$5.08 per share. That implies that an insider found the current price of HK$5.75 per share to be enticing. That means they have been optimistic about the company in the past, though they may have changed their mind. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. Happily, the Essex Bio-Technology insider decided to buy shares at close to current prices. Mia Je Ngiam was the only individual insider to buy over the year.
Mia Je Ngiam purchased 300000 shares over the year. The average price per share was HK$5.06. 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!
Essex Bio-Technology is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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. Essex Bio-Technology insiders own about HK$1.8b worth of shares (which is 54% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Essex Bio-Technology Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Essex Bio-Technology insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
But note: Essex Bio-Technology 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 firstname.lastname@example.org. 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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