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 before you buy or sell Yuexiu Transport Infrastructure Limited (HKG:1052), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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. 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 Yuexiu Transport Infrastructure
Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Doi Shu Cheung for HK$2.7m worth of shares, at about HK$5.46 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$5.23). 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. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Doi Shu Cheung was the only individual insider to buy during the last year.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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 Yuexiu Transport Infrastructure Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Our information indicates that Yuexiu Transport Infrastructure insiders own about HK$3.9m worth of shares. But they may have an indirect interest through a corporate structure that we haven't picked up on. We might be missing something but that seems like very low insider ownership.
So What Does This Data Suggest About Yuexiu Transport Infrastructure Insiders?
The fact that there have been no Yuexiu Transport Infrastructure insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. We'd like to see bigger individual holdings. However, we don't see anything to make us think Yuexiu Transport Infrastructure insiders are doubting the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 2 warning signs for Yuexiu Transport Infrastructure (of which 1 is a bit concerning!) you should know about.
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, but not derivative transactions.
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