We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Hope Bancorp, Inc. (NASDAQ:HOPE).
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 in the company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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'.
Hope Bancorp Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Honorary Chairman of the Board, Steven Koh, for US$2.3m worth of shares, at about US$10.64 per share. That means that even when the share price was below the current price of US$15.15, 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. It is worth noting that this sale was only 6.1% of Steven Koh's holding. Steven Koh was the only individual insider to sell shares in the last twelve months.
Steven Koh ditched 537.92k shares over the year. The average price per share was US$10.23. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Does Hope Bancorp Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Hope Bancorp insiders own 4.6% of the company, worth about US$87m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Hope Bancorp Insider Transactions Indicate?
The fact that there have been no Hope Bancorp insider transactions recently certainly doesn't bother us. We don't take much encouragement from the transactions by Hope Bancorp insiders. But it's good to see that insiders own shares in the company. 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. Every company has risks, and we've spotted 2 warning signs for Hope Bancorp 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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