Insiders Made Right Decision To Sell As KE Holdings Dips 14%

Over the past year, insiders sold CN¥2.2m worth of KE Holdings Inc. (NYSE:BEKE) stock at an average price of CN¥5.62 per share allowing them to get the most out of their money. After the stock price dropped 14% last week, the company's market value declined by US$3.4b, but insiders were able to mitigate their losses.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for KE Holdings

The Last 12 Months Of Insider Transactions At KE Holdings

In the last twelve months, the biggest single sale by an insider was when the CFO & Executive Director, Tao Xu, sold US$1.1m worth of shares at a price of US$5.42 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$16.66. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 7.3% of Tao Xu's holding.

In total, KE Holdings insiders sold more than they bought over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

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KE Holdings Insiders Are Selling The Stock

The last three months saw significant insider selling at KE Holdings. In total, insiders dumped US$142k 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 Of KE Holdings

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that KE Holdings insiders own 8.8% of the company, worth about US$1.8b. 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 KE Holdings Insider Transactions Indicate?

Insiders haven't bought KE Holdings stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since KE Holdings is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. While conducting our analysis, we found that KE Holdings has 2 warning signs and it would be unwise to ignore them.

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 of direct interests only, but not derivative transactions or indirect interests.

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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.