Sunac China Holdings Limited (HKG:1918) Insiders Increased Their Holdings

By
Simply Wall St
Published
July 25, 2021
SEHK:1918
Source: Shutterstock

We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Sunac China Holdings Limited (HKG:1918).

What Is Insider Buying?

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.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

See our latest analysis for Sunac China Holdings

Sunac China Holdings Insider Transactions Over The Last Year

The Founder & Executive Chairman Hongbin Sun made the biggest insider purchase in the last 12 months. That single transaction was for HK$79m worth of shares at a price of HK$27.12 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$23.65). 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. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

In the last twelve months Sunac China Holdings insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
SEHK:1918 Insider Trading Volume July 26th 2021

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).

Sunac China Holdings Insiders Bought Stock Recently

Over the last quarter, Sunac China Holdings insiders have spent a meaningful amount on shares. Overall, two insiders shelled out HK$86m for shares in the company -- and none sold. This makes one think the business has some good points.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. 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's great to see that Sunac China Holdings insiders own 45% of the company, worth about HK$50b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Sunac China Holdings Tell Us?

It's certainly positive to see the recent insider purchases. We also take confidence from the longer term picture of insider transactions. When combined with notable insider ownership, these factors suggest Sunac China Holdings insiders are well aligned, and quite possibly think the share price is too low. Looks promising! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. You'd be interested to know, that we found 4 warning signs for Sunac China Holdings and we suggest you have a look.

Of course Sunac China Holdings 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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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. 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.
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