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We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Want Want China Holdings Limited (HKG:151).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Want Want China Holdings
Over the last year, we can see that the biggest insider purchase was by Chairman & CEO Eng-Meng Tsai for HK$52m worth of shares, at about HK$6.54 per share. That means that an insider was happy to buy shares at above the current price of HK$6.30. It's very possible they regret the purchase, but it's more likely they are bullish about the company. 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. Eng-Meng Tsai was the only individual insider to buy shares in the last twelve months.
Eng-Meng Tsai bought 55.6m shares over the last 12 months at an average price of HK$6.32. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Want Want China 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 Want Want China Holdings
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Want Want China Holdings insiders own 56% of the company, currently worth about HK$43b 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 Want Want China Holdings Insider Transactions Indicate?
The fact that there have been no Want Want China Holdings insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. It would be great to see more insider buying, but overall it seems like Want Want China Holdings insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. Of course, the future is what matters most. So if you are interested in Want Want China Holdings, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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 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.