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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Chongqing Iron & Steel Company Limited (HKG:1053).
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, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Chongqing Iron & Steel
In the last twelve months, the biggest single purchase by an insider was when Hung Sang Ng bought HK$12m worth of shares at a price of HK$1.38 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$1.27). 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 is very important. 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. The only individual insider to buy over the last year was Hung Sang Ng. Notably Hung Sang Ng was also the biggest seller, having sold HK$5.2m worth of shares.
Hung Sang Ng bought a total of 9.9m shares over the year at an average price of HK$1.36. 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!
Chongqing Iron & Steel is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Chongqing Iron & Steel insiders own 0.8% of the company, worth about HK$173m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Chongqing Iron & Steel Tell Us?
It's certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Chongqing Iron & Steel. One for the watchlist, at least! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course Chongqing Iron & Steel may not be the best stock to buy. So you may wish to see this free collection of high quality 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.