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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in China Traditional Chinese Medicine Holdings Co. Limited (HKG:570).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 China Traditional Chinese Medicine Holdings
Over the last year, we can see that the biggest insider sale was by the CEO, President, Xiaochun Wang, for HK$548m worth of shares, at about HK$4.98 per share. So we know that an insider sold shares at around the present share price of HK$4.25. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign. Xiaochun Wang was the only individual insider to sell over the last year. Notably Xiaochun Wang was also the biggest buyer, having purchased HK$16m worth of shares.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like China Traditional Chinese Medicine Holdings better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does China Traditional Chinese Medicine Holdings Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. 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 China Traditional Chinese Medicine Holdings insiders own 5.4% of the company, worth about HK$1.1b. 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 China Traditional Chinese Medicine Holdings Insider Transactions Indicate?
An insider hasn't bought China Traditional Chinese Medicine Holdings stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, China Traditional Chinese Medicine Holdings makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for China Traditional Chinese Medicine Holdings.
But note: China Traditional Chinese Medicine Holdings 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.
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.