Should You Take Comfort From Insider Transactions At China SCE Group Holdings Limited (HKG:1966)?

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 China SCE Group Holdings Limited (HKG:1966).

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.

We don't think shareholders should simply follow insider transactions. 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'.

View our latest analysis for China SCE Group Holdings

The Last 12 Months Of Insider Transactions At China SCE Group Holdings

In the last twelve months, the biggest single purchase by an insider was when Chairman Chiu Wong bought HK$21m worth of shares at a price of HK$4.14 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$3.27). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. The only individual insider to buy over the last year was Chiu Wong.

Chiu Wong purchased 8.00m shares over the year. The average price per share was HK$3.83. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

China SCE Group Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. China SCE Group Holdings insiders own 61% of the company, currently worth about HK$8.5b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About China SCE Group Holdings Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like China SCE Group Holdings insiders think the business has merit. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing China SCE Group Holdings. To that end, you should learn about the 3 warning signs we've spotted with China SCE Group Holdings (including 2 which shouldn't be ignored).

Of course China SCE Group 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.

If you’re looking to trade China SCE Group Holdings, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.