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 we'll take a look at whether insiders have been buying or selling shares in Guan Chao Holdings Limited (HKG:1872).
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, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. 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 Guan Chao Holdings
In the last twelve months, the biggest single sale by an insider was when the Chairman, Shuay Tan, sold HK$48m worth of shares at a price of HK$0.52 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is HK$0.32. So it may not tell us anything about how insiders feel about the current share price. The only individual insider seller over the last year was Shuay Tan.
Shuay Tan sold a total of 222395000 shares over the year at an average price of S$0.51. 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!
I will like Guan Chao 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.
Guan Chao Holdings Insiders Are Selling The Stock
The last three months saw significant insider selling at Guan Chao Holdings. Specifically, Chairman Shuay Tan ditched S$113m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
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. Guan Chao Holdings insiders own 50% of the company, currently worth about HK$144m based on the recent share price. 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 Does This Data Suggest About Guan Chao Holdings Insiders?
An insider sold stock recently, but they haven't been buying. And even if we look to the last year, we didn't see any purchases. It is good to see high insider ownership, but the insider selling leaves us cautious. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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 currently account for open market transactions and private dispositions, but not derivative transactions.
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.