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 before you buy or sell Huazhang Technology Holding Limited (HKG:1673), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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.’
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The Last 12 Months Of Insider Transactions At Huazhang Technology Holding
In the last twelve months, the biggest single sale by an insider was when Kam Cheong Yan sold HK$3.8m worth of shares at a price of HK$3.84 per share. That means that an insider was selling shares at slightly below the current price (HK$4.08). While their view may have changed since they sold, this isn’t a particularly bullish sign. As a general rule we consider it to be discouraging when insiders are selling below the current price. We note that the biggest single sale was only 29.8% of Kam Cheong Yan’s holding. Kam Cheong Yan was the only individual insider to sell over the last year.
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!
I will like Huazhang Technology Holding 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 Huazhang Technology Holding Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Based on our data, Huazhang Technology Holding insiders have about 0.4% of the stock, worth approximately HK$11m. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. I generally like to see higher levels of ownership.
What Might The Insider Transactions At Huazhang Technology Holding Tell Us?
The fact that there have been no Huazhang Technology Holding insider transactions recently certainly doesn’t bother us. Still, the insider transactions at Huazhang Technology Holding in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk of the company. 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 .
Of course Huazhang Technology Holding may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.