SITC International Holdings Company Limited, a shipping logistics company, provides integrated transportation and logistics solutions in Mainland China, Hong Kong, Taiwan, Japan, Southeast Asia, and internationally. SITC International Holdings is one of Hong Kong’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 5.48 million shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. However, these signals may not be enough to gain conviction on whether to invest. I will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.
Who Are The Insiders?
Over the past three months, more shares have been bought than sold by SITC International Holdings’s’ insiders. In total, individual insiders own over 42.44 million shares in the business, which makes up around 1.59% of total shares outstanding. . The entity that bought on the open market in the last three months was FMR LLC. 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.
Does Buying Activity Reflect Future Growth?
Analysts’ expectations for earnings over the next 3 years of 53.22% provides a strong outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Digging deeper into the line items, SITC International Holdings is expected to experience a rather subdued top-line growth over the next year, but a strong double-digit earnings growth of 13.81%. This may mean the company has effectively managed costs in order to pump up earnings growth. Insider confidence in the company could be signalled by their net buying activity as they expect sustained growth moving forward. Or they may believe share price is below intrinsic value, offering an opportunity to buy.
Did Insiders Buy On Share Price Volatility?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. SITC International Holdings’s shares ranged between HK$9.23 and HK$6.95 over the past three months. This suggests moderate volatility with a share price movement of 32.81%. This movement is potentially meaningful enough to trade on if insiders believe the market has mispriced their companies’ shares.
SITC International Holdings’s net buying tells us the stock is in favour with some insiders, which is fairly consistent with earnings growth expectations, on top of a reasonable share price movement around the same time. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two key aspects you should further examine:
- Financial Health: Does SITC International Holdings 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 SITC International Holdings? 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 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 firstname.lastname@example.org.