It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we'll take a look at whether insiders have been buying or selling shares in Zhejiang Cangnan Instrument Group Company Limited (HKG:1743).
Do Insider Transactions Matter?
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 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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Zhejiang Cangnan Instrument Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Yanjie Qiu for HK$42m worth of shares, at about HK$15.80 per share. That means that an insider was happy to buy shares at above the current price of HK$14.56. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Yanjie Qiu was the only individual insider to buy over the year.
You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
Zhejiang Cangnan Instrument Group 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 Zhejiang Cangnan Instrument Group
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Zhejiang Cangnan Instrument Group insiders own about HK$515m worth of shares (which is 51% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Zhejiang Cangnan Instrument Group Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Zhejiang Cangnan Instrument Group insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. Along with insider transactions, I recommend checking if Zhejiang Cangnan Instrument Group is growing revenue. This free chart of historic revenue and earnings should make that easy.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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 firstname.lastname@example.org. 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.