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 China Traditional Chinese Medicine Holdings Co Limited (HKG:570).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, including certain disclosures.
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 Colombia 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
Over the last year, we can see that the biggest insider purchase was by MD & Executive Director Xiaochun Wang for HK$16m worth of shares, at about HK$4.80 per share. That means that an insider was happy to buy shares at around the current price. Of course they may have changed their mind. But this suggests they are optimistic. Nonetheless, we consider it positive if insiders want to buy at around the current share price. The only inside buyer over the last year was Xiaochun Wang.
The chart below shows insider transactions over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Does China Traditional Chinese Medicine Holdings Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Insiders own 12% of China Traditional Chinese Medicine Holdings shares, worth about HK$426m. 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 China Traditional Chinese Medicine Holdings Insider Transactions Indicate?
It’s certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that China Traditional Chinese Medicine Holdings insiders are expecting a bright future. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.