Insider Buyers At China Fortune Holdings Recover Some Losses, But Still Down HK$400k

Insiders who purchased HK$2.60m worth of China Fortune Holdings Limited (HKG:110) shares over the past year recouped some of their losses after price gained 10.0% last week. However, the purchase is proving to be an expensive wager as insiders are yet to get ahead of their losses which currently stand at HK$400k since the time of purchase.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for China Fortune Holdings

The Last 12 Months Of Insider Transactions At China Fortune Holdings

In the last twelve months, the biggest single purchase by an insider was when Executive Director Jianwu Li bought HK$2.6m worth of shares at a price of HK$0.26 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.22). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Jianwu Li was the only individual insider to buy shares in the last twelve months.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. 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. 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).

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. I reckon it's a good sign if insiders own a significant number of shares in the company. China Fortune Holdings insiders own 60% of the company, currently worth about HK$28m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The China Fortune Holdings Insider Transactions Indicate?

The fact that there have been no China Fortune Holdings insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. It would be great to see more insider buying, but overall it seems like China Fortune Holdings insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the 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. For instance, we've identified 3 warning signs for China Fortune Holdings (2 make us uncomfortable) you should be aware of.

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.

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

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.