We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Essex Bio-Technology Limited (HKG:1061), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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 Essex Bio-Technology
In the last twelve months, the biggest single purchase by an insider was when Founder & Chairman Mia Je Ngiam bought HK$640k worth of shares at a price of HK$5.08 per share. That implies that an insider found the current price of HK$5.63 per share to be enticing. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. In this case we're pleased to report that the insider bought shares at close to current prices. Mia Je Ngiam was the only individual insider to buy shares in the last twelve months.
Mia Je Ngiam bought a total of 300000 shares over the year at an average price of HK$5.06. 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!
Essex Bio-Technology 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 Essex Bio-Technology
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. It's great to see that Essex Bio-Technology insiders own 54% of the company, worth about HK$1.7b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Essex Bio-Technology Tell Us?
The recent insider purchase is heartening. 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 Essex Bio-Technology. That's what I like to see! Along with insider transactions, I recommend checking if Essex Bio-Technology is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course Essex Bio-Technology 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.
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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.