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 shareholders might well want to know whether insiders have been buying or selling shares in Hwa Hong Corporation Limited (SGX:H19).
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, 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. 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 Hwa Hong
Over the last year, we can see that the biggest insider purchase was by insider Kay Eng Ong for S$78k worth of shares, at about S$0.34 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being S$0.29). Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
In the last twelve months Hwa Hong insiders were buying shares, but not selling. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Hwa Hong Insiders Bought Stock Recently
Over the last quarter, Hwa Hong insiders have spent a meaningful amount on shares. insider Eng Ong spent S$388k on stock, and there wasn't any selling. This makes one think the business has some good points.
Does Hwa Hong Boast High Insider Ownership?
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. We usually like to see fairly high levels of insider ownership. Hwa Hong insiders own about S$59m worth of shares. That equates to 33% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Hwa Hong Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Insiders likely see value in Hwa Hong shares, given these transactions (along with notable insider ownership of the company). While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For instance, we've identified 5 warning signs for Hwa Hong (2 are concerning) you should be aware of.
But note: Hwa Hong 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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