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 we’ll take a look at whether insiders have been buying or selling shares in China Traditional Chinese Medicine Holdings Co. Limited (HKG:570).
What Is Insider Buying?
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 don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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’.
The Last 12 Months Of Insider Transactions At China Traditional Chinese Medicine Holdings
The CEO, President, Xiaochun Wang, made the biggest insider sale in the last 12 months. That single transaction was for HK$548m worth of shares at a price of HK$4.98 each. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (HK$3.63). So it is hard to draw any strong conclusion from it. The only individual insider seller over the last year was Xiaochun Wang. Notably Xiaochun Wang was also the biggest buyer, having purchased HK$16m worth of shares.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. China Traditional Chinese Medicine Holdings insiders own 5.4% of the company, currently worth about HK$994m 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 China Traditional Chinese Medicine Holdings Insiders?
The fact that there have been no China Traditional Chinese Medicine Holdings insider transactions recently certainly doesn’t bother us. It’s heartening that insiders own plenty of stock, but we’d like to see more insider buying, since the last year of China Traditional Chinese Medicine Holdings insider transactions don’t fill us with confidence. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for China Traditional Chinese Medicine Holdings.
But note: China Traditional Chinese Medicine Holdings 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.