We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in IHH Healthcare Berhad (KLSE:IHH).
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, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
IHH Healthcare Berhad Insider Transactions Over The Last Year
The Non-Independent & Non-Executive Director, Mehmet Aydinlar, made the biggest insider sale in the last 12 months. That single transaction was for RM5.3m worth of shares at a price of RM5.10 each. That means that even when the share price was below the current price of RM5.31, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 0.2% of Mehmet Aydinlar's holding. Mehmet Aydinlar was the only individual insider to sell shares in the last twelve months.
The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will 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. I reckon it's a good sign if insiders own a significant number of shares in the company. IHH Healthcare Berhad insiders own 5.9% of the company, currently worth about RM2.8b 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 Do The IHH Healthcare Berhad Insider Transactions Indicate?
The fact that there have been no IHH Healthcare Berhad insider transactions recently certainly doesn't bother us. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the IHH Healthcare Berhad insiders selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 2 warning signs for IHH Healthcare Berhad you should know about.
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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