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Should You Take Comfort From Insider Transactions At Luk Fook Holdings (International) Limited (HKG:590)?

Simply Wall St

We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Luk Fook Holdings (International) Limited (HKG:590), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. 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. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’

View our latest analysis for Luk Fook Holdings (International)

The Last 12 Months Of Insider Transactions At Luk Fook Holdings (International)

Founder Wai Wong made the biggest insider purchase in the last 12 months. That single transaction was for HK$15m worth of shares at a price of HK$26.80 each. So it’s clear an insider wanted to buy, even at a higher price. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. It’s not at all bad to see insiders buy shares at or above current prices.

Happily, we note that in the last year insiders paid HK$53m for 2.04m shares. But they sold 10.00k for HK$261k. In the last twelve months there was more buying than selling by Luk Fook Holdings (International) insiders. Their average price was about HK$26.10. I’d consider this a positive as it suggests insiders see value at around the current price, which is HK$26.00. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

SEHK:590 Recent Insider Trading, March 10th 2019

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insiders at Luk Fook Holdings (International) Have Bought Stock Recently

There has been significantly more insider buying, than selling, at Luk Fook Holdings (International), over the last three months. In total, Wai Wong bought HK$23m worth of shares in that time. But we did see Hau Yeung Wong sell shares worth HK$261k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.

Insider Ownership

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. Luk Fook Holdings (International) insiders own about HK$362m worth of shares. That equates to 2.4% of the company. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About Luk Fook Holdings (International) Insiders?

It’s certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Luk Fook Holdings (International). Nice! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Luk Fook Holdings (International).

Of course Luk Fook Holdings (International) may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.