We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell China Best Group Holding Limited (HKG:370), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At China Best Group Holding
In the last twelve months, the biggest single purchase by an insider was when insider Zizhen Fu bought HK$35m worth of shares at a price of HK$0.20 per share. That means that an insider was happy to buy shares at above the current price of HK$0.15. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. To us, it’s very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Zizhen Fu was the only individual insider to buy shares in the last twelve months.
The chart below shows insider transactions (by 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!
Does China Best Group Holding Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 19% of China Best Group Holding shares, worth about HK$155m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About China Best Group Holding Insiders?
It’s certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about China Best Group Holding. One for the watchlist, at least! Along with insider transactions, I recommend checking if China Best Group Holding is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course China Best Group Holding 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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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.