We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Yangzhou Guangling District Taihe Rural Micro-finance Company Limited (HKG:1915).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Yangzhou Guangling District Taihe Rural Micro-finance
The insider, Cho Hung Suen, made the biggest insider sale in the last 12 months. That single transaction was for HK$4.0m worth of shares at a price of HK$2.30 each. That means that even when the share price was below the current price of HK$2.67, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 7.4% of Cho Hung Suen's holding. The only individual insider seller over the last year was Cho Hung Suen.
Cho Hung Suen ditched 3.8m shares over the year. The average price per share was CN¥2.30. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Yangzhou Guangling District Taihe Rural Micro-finance better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Yangzhou Guangling District Taihe Rural Micro-finance insiders own 7.1% of the company, worth about HK$115m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Yangzhou Guangling District Taihe Rural Micro-finance Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back at the last year, we don't gain confidence from the Yangzhou Guangling District Taihe Rural Micro-finance insiders selling. Along with insider transactions, I recommend checking if Yangzhou Guangling District Taihe Rural Micro-finance is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course Yangzhou Guangling District Taihe Rural Micro-finance may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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