What Do China Oilfield Services Limited (HKG:2883) Insiders Know That You Don’t?
China Oilfield Services Limited, together with its subsidiaries, provides integrated offshore oilfield services in Mainland China and internationally. China Oilfield Services is one of China’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 15 million shares during this period. Generally, insiders buying more shares in their own firm sends a bullish signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.
View our latest analysis for China Oilfield Services
Who Are The Insiders?
There were more China Oilfield Services insiders that have bought shares than those that have sold. In total, individual insiders own over 4 million shares in the business, which makes up around 0.09% of total shares outstanding. .
The entity that bought on the open market in the last three months was
BlackRock Inc. Platinum Investment Management Limited. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is Future Growth Outlook As Bullish?
At first glance, analysts’ revenue growth expectations of 31.55% over the next three years illustrates a satisfactory outlook for the company which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates,analysts anticipate a strong double-digit revenue growth next year, which Insiders who believe in higher future growth could increase their shareholdings, signalling conviction in the company strategy. However, this net buying may simply reflect their views that the share price is well-below its intrinsic value.
Did Stock Price Volatility Instigate Buying?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. China Oilfield Services’s shares ranged between HK$9.01 and HK$7.16 over the past three months. This indicates reasonable volatility with a change of 25.84%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.
Next Steps:
China Oilfield Services’s insider meaningful buying activity tells us the shares are currently in favour, which is fairly consistent with earnings growth expectations, though share price volatility was perhaps inconsequential to cash in on any mispricing. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve compiled two key aspects you should further research:
Financial Health: Does China Oilfield Services have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of China Oilfield Services? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass 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.
