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 before you buy or sell China NT Pharma Group Company Limited (HKG:1011), you may well want to know whether insiders have been buying or selling.
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, 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 China NT Pharma Group
insider Chong Mang Leong made the biggest insider purchase in the last 12 months. That single transaction was for HK$82m worth of shares at a price of HK$0.41 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.20). 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. 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. Chong Mang Leong was the only individual insider to buy over the year.
The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
China NT Pharma 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 China NT Pharma 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. A high insider ownership often makes company leadership more mindful of shareholder interests. China NT Pharma Group insiders own about HK$110m worth of shares. That equates to 28% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About China NT Pharma Group Insiders?
It's certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about China NT Pharma Group. Looks promising! I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free.
Of course China NT Pharma Group 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.
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.
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