We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Lianhua Supermarket Holdings Co., Ltd. (HKG:980).
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, such insiders must disclose their trading activities, and not trade on inside information.
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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Lianhua Supermarket Holdings
Over the last year, we can see that the biggest insider purchase was by insider Zizuo Xu for HK$5.7m worth of shares, at about HK$1.70 per share. That means that an insider was happy to buy shares at above the current price of HK$1.26. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Zizuo Xu was the only individual insider to buy shares in the last twelve months.
Zizuo Xu bought 13.26m shares over the last 12 months at an average price of HK$1.61. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Lianhua Supermarket Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Our data indicates that Lianhua Supermarket Holdings insiders own about HK$52m worth of shares (which is 3.7% of the company). We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Lianhua Supermarket Holdings Insiders?
The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Lianhua Supermarket Holdings we think they are probably pretty confident of a bright future. Of course, the future is what matters most. So if you are interested in Lianhua Supermarket Holdings, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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 spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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