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Should You Take Comfort From Insider Transactions At Carpenter Tan Holdings Limited (HKG:837)?

Simply Wall St

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 shareholders might well want to know whether insiders have been buying or selling shares in Carpenter Tan Holdings Limited (HKG:837).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 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'.

Check out our latest analysis for Carpenter Tan Holdings

Carpenter Tan Holdings Insider Transactions Over The Last Year

CEO & Executive Director Lizi Tan made the biggest insider purchase in the last 12 months. That single transaction was for HK$565k worth of shares at a price of HK$4.43 each. So it's clear an insider wanted to buy, at around the current price, which is HK$4.45. 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. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider bought shares at close to current prices. Lizi Tan was the only individual insider to buy shares in the last twelve months.

Lizi Tan bought a total of 225k shares over the year at an average price of HK$4.42. 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!

SEHK:837 Recent Insider Trading, August 20th 2019

Carpenter Tan Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership of Carpenter Tan Holdings

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Carpenter Tan Holdings insiders own 67% of the company, worth about HK$750m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Carpenter Tan Holdings Tell Us?

The fact that there have been no Carpenter Tan Holdings insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Carpenter Tan Holdings insiders think the business has merit. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.