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 shareholders might well want to know whether insiders have been buying or selling shares in 3SBio Inc. (HKG:1530).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
3SBio Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Co-Founder Jing Lou for HK$15m worth of shares, at about HK$8.00 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$6.88). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Jing Lou was the only individual insider to buy during the last year.
The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
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. It appears that 3SBio insiders own 4.2% of the company, worth about HK$723m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The 3SBio Insider Transactions Indicate?
The fact that there have been no 3SBio insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like 3SBio 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. Every company has risks, and we've spotted 1 warning sign for 3SBio you should know about.
Of course 3SBio may not be the best stock to buy. So you may wish to see this free collection of high quality 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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