It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Tian Chang Group Holdings Ltd. (HKG:2182).
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 in the company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.'
Tian Chang Group Holdings Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Chairman & CEO, Tsan Lam Chan, sold HK$44m worth of shares at a price of HK$0.48 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of HK$0.66. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 19.7% of Tsan Lam Chan's holding. The only individual insider seller over the last year was Tsan Lam Chan.
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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Tian Chang Group Holdings Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Tian Chang Group Holdings shares over the last three months. In total, Tsan Lam Chan sold HK$44m worth of shares in that time. Meanwhile insider Chak Cheng bought HK$38m worth, as we said above. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.
Insider Ownership of Tian Chang Group Holdings
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Tian Chang Group Holdings insiders own about HK$312m worth of shares (which is 73% of the company). 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 Tian Chang Group Holdings Insider Transactions Indicate?
The insider sales have outweighed the insider buying, at Tian Chang Group Holdings, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. On the plus side, Tian Chang Group Holdings makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. Along with insider transactions, I recommend checking if Tian Chang Group Holdings is growing revenue. This free chart of historic revenue and earnings should make that easy.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
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 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. Thank you for reading.