We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell China Public Procurement Limited (HKG:1094), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At China Public Procurement
Over the last year, we can see that the biggest insider purchase was by insider Gegeng Huang for HK$12m worth of shares, at about HK$0.34 per share. That means that an insider was happy to buy shares at above the current price of HK$0.27. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing 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. The only individual insider to buy over the last year was Gegeng Huang.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
China Public Procurement is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of China Public Procurement
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 34% of China Public Procurement shares, worth about HK$18m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About China Public Procurement Insiders?
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. Insiders own shares in China Public Procurement and we see no evidence to suggest they are worried about the future. Along with insider transactions, I recommend checking if China Public Procurement is growing revenue. This free chart of historic revenue and earnings should make that easy.
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.
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.
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