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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 Evergrande Group (HKG:3333).
Do Insider Transactions Matter?
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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
China Evergrande Group Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Hoi-wan Chan bought HK$277m worth of shares at a price of HK$28.81 per share. That means that even when the share price was higher, an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. That purchase may suggest an expectation of positive returns over the long term.
Happily, we note that in the last year insiders bought 14.13m shares for a total of HK$386m. In the last twelve months there was more buying than selling by China Evergrande Group insiders. The average buy price was around HK$27.28. This is nice to see since it implies that insiders might see value around current prices (around HK$26.15). You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Does China Evergrande Group Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that China Evergrande Group insiders own 80% of the company, worth about HK$283b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At China Evergrande Group Tell Us?
It doesn't really mean much that no insider has traded China Evergrande Group shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like China Evergrande Group insiders think the business has merit. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for China Evergrande Group.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.