It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell Cheuk Nang (Holdings) Limited (HKG:131), you may well want to know whether insiders have been buying or selling.
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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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.
Cheuk Nang (Holdings) Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Founder Sze-Tsung Chao for HK$62m worth of shares, at about HK$4.30 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$3.88). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Sze-Tsung Chao was the only individual insider to buy shares in the last twelve months.
Sze-Tsung Chao bought a total of 23355388 shares over the year at an average price of HK$4.08. 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Does Cheuk Nang (Holdings) Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Cheuk Nang (Holdings) insiders own about HK$1.7b worth of shares (which is 74% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Cheuk Nang (Holdings) Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Cheuk Nang (Holdings) insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. Along with insider transactions, I recommend checking if Cheuk Nang (Holdings) is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Cheuk Nang (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.
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.