Insiders Re-Evaluate Their HK$159.2m Stock Purchase As China Zenith Chemical Group Falls To HK$66m

Insiders who bought HK$159.2m worth of China Zenith Chemical Group Limited's (HKG:362) stock at an average buy price of HK$0.66 over the last year may be disappointed by the recent 20% decrease in the stock. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only HK$30.0m.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for China Zenith Chemical Group

The Last 12 Months Of Insider Transactions At China Zenith Chemical Group

In the last twelve months, the biggest single purchase by an insider was when Executive Director Yiduan Tang bought HK$138m worth of shares at a price of HK$0.97 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.13). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

Over the last year, we can see that insiders have bought 240.20m shares worth HK$159m. But insiders sold 169.95m shares worth HK$150m. In total, China Zenith Chemical Group insiders bought more than they sold over the last year. Their average price was about HK$0.66. These transactions suggest that insiders have considered the current price attractive. 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!

China Zenith Chemical Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insiders At China Zenith Chemical Group Have Sold Stock Recently

We've seen more insider selling than insider buying at China Zenith Chemical Group recently. In that time, insiders dumped HK$149m worth of shares. On the flip side, Executive Director Yiduan Tang spent HK$138m on purchasing shares. The share price has moved a bit recently, but it's hard to argue that the selling is a positive.

Insider Ownership Of China Zenith Chemical Group

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. China Zenith Chemical Group insiders own 43% of the company, currently worth about HK$28m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About China Zenith Chemical Group Insiders?

The stark truth for China Zenith Chemical Group is that there has been more insider selling than insider buying in the last three months. On the other hand, the insider transactions over the last year are encouraging. We are also comforted by the high levels of insider ownership. So we're not too bothered by recent selling. 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. Be aware that China Zenith Chemical Group is showing 6 warning signs in our investment analysis, and 5 of those are concerning...

Of course China Zenith Chemical Group may not be the best stock to buy. So you may wish to see this free collection of high quality 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 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.