Having purchased HK$26m worth of The Hong Kong and China Gas Company Limited (HKG:3) stock, the recent 4.2% pullback is not what insiders may have expected

The recent 4.2% drop in The Hong Kong and China Gas Company Limited's (HKG:3) stock could come as a blow to insiders who purchased HK$26m worth of stock at an average buy price of HK$9.63 over the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth HK$22m, which is not great.

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 Hong Kong and China Gas

Hong Kong and China Gas Insider Transactions Over The Last Year

The Independent Non-Executive Director Kwok-Po Li made the biggest insider purchase in the last 12 months. That single transaction was for HK$19m worth of shares at a price of HK$9.61 each. That means that an insider was happy to buy shares at above the current price of HK$8.19. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. The only individual insider to buy over the last year was Kwok-Po Li.

Kwok-Po Li purchased 2.70m shares over the year. The average price per share was HK$9.63. The chart below shows insider transactions (by companies and individuals) over the last year. 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 of Hong Kong and China Gas

For a common shareholder, it is worth checking how many shares are held by company 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$497m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Hong Kong and China Gas Tell Us?

There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like Hong Kong and China Gas insiders think the business has merit. 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 help with this, we've discovered 3 warning signs (2 can't be ignored!) that you ought to be aware of before buying any shares in Hong Kong and China Gas.

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.

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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.