Should You Take Comfort From Insider Transactions At China Harmony Auto Holding Limited (HKG:3836)?

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 Harmony Auto Holding Limited (HKG:3836), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

See our latest analysis for China Harmony Auto Holding

China Harmony Auto Holding Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Executive Chairman of the Board Changge Feng for HK$25m worth of shares, at about HK$3.23 per share. That implies that an insider found the current price of HK$3.37 per share to be enticing. 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. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the China Harmony Auto Holding insider decided to buy shares at close to current prices. Changge Feng was the only individual insider to buy shares in the last twelve months.

Changge Feng bought a total of 17.27m shares over the year at an average price of HK$3.29. 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!

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).

Does China Harmony Auto Holding Boast High 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. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that China Harmony Auto Holding insiders own 45% of the company, worth about HK$2.4b. 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 China Harmony Auto Holding Tell Us?

The fact that there have been no China Harmony Auto Holding insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, China Harmony Auto Holding insiders feel good about the company's future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of China Harmony Auto Holding.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 Harmony Auto Holding, 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.