Insiders' CN¥42.1m Investments In Red Following China ZhengTong Auto Services Holdings' HK$44m Dip In Market Value

The recent price decline of 17% in China ZhengTong Auto Services Holdings Limited's (HKG:1728) stock may have disappointed insiders who bought CN¥42.1m worth of shares at an average price of CN¥0.13 in the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only CN¥21.2m.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for China ZhengTong Auto Services Holdings

The Last 12 Months Of Insider Transactions At China ZhengTong Auto Services Holdings

In the last twelve months, the biggest single purchase by an insider was when insider Liguo Yang bought HK$40m worth of shares at a price of HK$0.12 per share. That means that even when the share price was higher than HK$0.064 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

While China ZhengTong Auto Services Holdings insiders bought shares during the last year, they didn't sell. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At China ZhengTong Auto Services Holdings Have Bought Stock Recently

Over the last three months, we've seen a bit of insider buying at China ZhengTong Auto Services Holdings. insider Mui Cheung shelled out HK$203k for shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.

Insider Ownership Of China ZhengTong Auto Services Holdings

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. China ZhengTong Auto Services Holdings insiders own about HK$42m worth of shares. That equates to 20% of the company. 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 ZhengTong Auto Services Holdings Insider Transactions Indicate?

It's certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Insiders likely see value in China ZhengTong Auto Services Holdings shares, given these transactions (along with notable insider ownership of the company). While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 4 warning signs with China ZhengTong Auto Services Holdings and understanding these should be part of your investment process.

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.

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.