It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Selling?
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.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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 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$16m worth of shares at a price of HK$15.94 per share. So it’s clear an insider wanted to buy, at around the current price. That means they have been optimistic about the company in the past, though they may have changed their mind. In any event it’s generally a positive if insiders are buying shares at around the current price. Kwok-Po Li was the only individual insider to buy over the year.
Kwok-Po Li purchased 2.60m shares over the year. The average price per share was HK$15.94. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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Does Hong Kong and China Gas 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. We usually like to see fairly high levels of insider ownership. Hong Kong and China Gas insiders own about HK$851m worth of shares (which is 0.3% of the company). 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 Hong Kong and China Gas Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded Hong Kong and China Gas shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. 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. Of course, the future is what matters most. So if you are interested in Hong Kong and China Gas, you should check out this free report on analyst forecasts for the company.
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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.