It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Bright Smart Securities & Commodities Group Limited (HKG:1428), you may well want to know whether insiders have been buying or selling.
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 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.'
The Last 12 Months Of Insider Transactions At Bright Smart Securities & Commodities Group
In fact, the recent purchase by Chairman of the Board Mow Lum Yip was not their only acquisition of Bright Smart Securities & Commodities Group shares this year. They previously made an even bigger purchase of HK$16m worth of shares at a price of HK$1.10 per share. That means that an insider was happy to buy shares at around the current price of HK$1.36. 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. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. Happily, the Bright Smart Securities & Commodities Group insider decided to buy shares at close to current prices. The only individual insider to buy over the last year was Mow Lum Yip.
Mow Lum Yip purchased 21.8m shares over the year. The average price per share was HK$1.14. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Bright Smart Securities & Commodities Group
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. It's great to see that Bright Smart Securities & Commodities Group insiders own 68% of the company, worth about HK$1.6b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Bright Smart Securities & Commodities Group Insider Transactions Indicate?
It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Bright Smart Securities & Commodities Group. One for the watchlist, at least! To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .
But note: Bright Smart Securities & Commodities Group may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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 email@example.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.