We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Huajun International Group Limited (HKG:377).
What Is Insider Buying?
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, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. 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 Huajun International Group
In the last twelve months, the biggest single purchase by an insider was when Executive Chairman Guang Bao Meng bought HK$3.7m worth of shares at a price of HK$14.88 per share. That means that an insider was happy to buy shares at above the current price of HK$11.50. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays 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. Guang Bao Meng was the only individual insider to buy shares in the last twelve months.
Guang Bao Meng purchased 257360 shares over the year. The average price per share was HK$14.71. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Huajun International Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. Huajun International Group insiders own about HK$530m worth of shares (which is 74% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Huajun International Group Insider Transactions Indicate?
The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Huajun International Group. That's what I like to see! 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.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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 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.
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