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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 shareholders might well want to know whether insiders have been buying or selling shares in China Dongxiang (Group) Co., Ltd. (HKG:3818).
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 it is perfectly logical to keep tabs on what insiders are doing. 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 China Dongxiang (Group)
Over the last year, we can see that the biggest insider purchase was by Co-president & Executive Director Chen Chen for HK$35m worth of shares, at about HK$1.15 per share. That means that even when the share price was higher than HK$0.99 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
In the last twelve months insiders paid HK$63m for 52.8m shares purchased. China Dongxiang (Group) may have bought shares in the last year, but they didn't sell any. 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!
China Dongxiang (Group) is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at China Dongxiang (Group) Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at China Dongxiang (Group). We can see that Chen Chen paid CN¥37m for shares in the company. No-one sold. This could be interpreted as suggesting a positive outlook.
Does China Dongxiang (Group) Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. China Dongxiang (Group) insiders own about HK$2.6b worth of shares (which is 45% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The China Dongxiang (Group) Insider Transactions Indicate?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about China Dongxiang (Group). That's what I like to see! Of course, the future is what matters most. So if you are interested in China Dongxiang (Group), you should check out this free report on analyst forecasts for the company.
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.
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.