We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in The Hong Kong and China Gas Company Limited (HKG:3).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 it is perfectly logical to keep tabs on what insiders are doing. 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 Hong Kong and China Gas
In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Director Kwok-Po Li bought HK$9.6m worth of shares at a price of HK$11.42 per share. So it's clear an insider wanted to buy, at around the current price, which is HK$12.18. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. Happily, the Hong Kong and China Gas insider decided to buy shares at close to current prices. Kwok-Po Li was the only individual insider to buy during the last year.
Kwok-Po Li bought a total of 2.10m shares over the year at an average price of HK$11.05. 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 plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Many investors like to check how much of a company is owned by 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. Insiders own 0.3% of Hong Kong and China Gas shares, worth about HK$706m. 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 Does This Data Suggest About Hong Kong and China Gas Insiders?
The fact that there have been no Hong Kong and China Gas 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 Hong Kong and China Gas 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. While conducting our analysis, we found that Hong Kong and China Gas has 2 warning signs and it would be unwise to ignore them.
But note: Hong Kong and China Gas may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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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