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We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Hong Fok Corporation Limited (SGX:H30), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
Hong Fok Insider Transactions Over The Last Year
Joint CEO & Director Sim Eng Cheong made the biggest insider purchase in the last 12 months. That single transaction was for S$3.7m worth of shares at a price of S$0.75 each. That implies that an insider found the current price of S$0.89 per share to be enticing. 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. If someone buys shares at well below current prices, it’s a good sign on balance, but keep in mind they may no longer see value. In this case we’re pleased to report that the insider purchases were made at close to current prices.
Happily, we note that in the last year insiders bought 11.7m shares for a total of S$8.8m. In the last twelve months Hong Fok insiders were buying shares, but not selling. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Hong Fok Insiders Bought Stock Recently
Over the last quarter, Hong Fok insiders have spent a meaningful amount on shares. Sim Eng Cheong spent S$829k on stock, and there wasn’t any selling. This is a positive in our book as it implies some confidence.
Insider Ownership of Hong Fok
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. It’s great to see that Hong Fok insiders own 30% of the company, worth about S$229m. 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 Fok Insider Transactions Indicate?
It’s certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Hong Fok. Nice! To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.