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 Chong Kin Group Holdings Limited (HKG:1609), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
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 Chong Kin Group Holdings
Over the last year, we can see that the biggest insider purchase was by Chairman of the Board & CEO Jinbing Zhang for HK$210m worth of shares, at about HK$3.50 per share. That means that even when the share price was higher than HK$3.00 (the recent price), an insider wanted to purchase shares. 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. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Jinbing Zhang was the only individual insider to buy shares in the last twelve months.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Chong Kin Group Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of Chong Kin Group Holdings
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Chong Kin Group Holdings insiders own 65% of the company, currently worth about HK$1.9b based on the recent share price. 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 Do The Chong Kin Group Holdings Insider Transactions Indicate?
The fact that there have been no Chong Kin Group Holdings insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, Chong Kin Group Holdings insiders feel good about the company's future. 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: Chong Kin Group Holdings 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.
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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