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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we’ll take a look at whether insiders have been buying or selling shares in Sinosoft Technology Group Limited (HKG:1297).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
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. 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’.
The Last 12 Months Of Insider Transactions At Sinosoft Technology Group
Chairlady & CEO Yingmei Xin made the biggest insider purchase in the last 12 months. That single transaction was for HK$2.0m worth of shares at a price of HK$2.34 each. That means that an insider was happy to buy shares at above the current price. 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. It’s not at all bad to see insiders buy shares at or above current prices. Yingmei Xin was the only individual insider to buy over the year.
Yingmei Xin bought 1.53m shares over the last 12 months at an average price of HK$2.32. The chart below shows insider transactions (by 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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Does Sinosoft Technology Group 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. 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 Sinosoft Technology Group insiders own 47% of the company, worth about HK$1.3b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Sinosoft Technology Group Insider Transactions Indicate?
The fact that there have been no Sinosoft Technology Group insider transactions recently certainly doesn’t bother us. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Sinosoft Technology Group insiders are reasonably well aligned (owning significant chunk of the company’s shares) and optimistic for the future. Of course, the future is what matters most. So if you are interested in Sinosoft Technology Group, 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.