Read This Before Buying Zhongyu Gas Holdings Limited (HKG:3633) Shares

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 we'll take a look at whether insiders have been buying or selling shares in Zhongyu Gas Holdings Limited (HKG:3633).

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, rules govern insider transactions, and certain disclosures are required.

We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

Check out our latest analysis for Zhongyu Gas Holdings

Zhongyu Gas Holdings Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Chairman of the Board Wenliang Wang for HK$3.0m worth of shares, at about HK$5.92 per share. That means that an insider was happy to buy shares at around the current price of HK$6.74. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. The good news for Zhongyu Gas Holdings share holders is that an insider was buying at near the current price. Wenliang Wang was the only individual insider to buy shares in the last twelve months.

Siu Lui divested 1.78m shares over the last 12 months at an average price of HK$6.81. 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!

I will like Zhongyu Gas Holdings better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insiders at Zhongyu Gas Holdings Have Sold Stock Recently

The last three months saw significant insider selling at Zhongyu Gas Holdings. In total, CEO, Company Secretary & Executive Director Siu Lui dumped HK$10m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Zhongyu Gas Holdings insiders own 30% of the company, worth about HK$5.5b. 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 Do The Zhongyu Gas Holdings Insider Transactions Indicate?

An insider hasn't bought Zhongyu Gas Holdings stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn't bring confidence, either. It is good to see high insider ownership, but the insider selling leaves us cautious. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 3 warning signs for Zhongyu Gas Holdings (1 is concerning!) and we strongly recommend you look at them before investing.

Of course Zhongyu Gas Holdings 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, but not derivative transactions.

If you decide to trade Zhongyu Gas Holdings, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.