Insiders Of 3SBio Retain CN¥7.6m Of Investment Selling At Higher Prices

While 3SBio Inc. (HKG:1530) shareholders have enjoyed a good week with stock up 10%, they need remain vigilant. In spite of the relatively cheap prices, insiders made the decision to sell CN¥7.6m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

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3SBio Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Non-Executive Director, Jiaoe Zhang, sold HK$5.7m worth of shares at a price of HK$12.42 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of HK$30.80. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 3.6% of Jiaoe Zhang's holding. Jiaoe Zhang was the only individual insider to sell over the last year.

Jiaoe Zhang ditched 605.50k shares over the year. The average price per share was CN¥12.62. 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!

View our latest analysis for 3SBio

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insider Ownership Of 3SBio

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that 3SBio insiders own 6.1% of the company, worth about HK$4.5b. 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 3SBio Tell Us?

There haven't been any insider transactions in the last three months -- that doesn't mean much. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of 3SBio insider transactions don't fill us with confidence. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that 3SBio has 1 warning sign and it would be unwise to ignore it.

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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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.