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 shareholders might well want to know whether insiders have been buying or selling shares in Dragon Mining Limited (HKG:1712).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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.'
Dragon Mining Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the insider, Yau Cheung Lau, for HK$39m worth of shares, at about HK$2.30 per share. That means that an insider was selling shares at around the current price of HK$1.96. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign. Notably Yau Cheung Lau was also the biggest buyer, having purchased HK$17m worth of shares.
All up, insiders sold more shares in Dragon Mining than they bought, over the last year. 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.
Insiders at Dragon Mining Have Sold Stock Recently
The last three months saw significant insider selling at Dragon Mining. Specifically, Yau Cheung Lau ditched AU$39m 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.
Insider Ownership of Dragon Mining
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. From what we can see in our data, insiders own only about HK$1.1m worth of Dragon Mining shares. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. This level of insider ownership is notably low, and not very encouraging.
So What Does This Data Suggest About Dragon Mining Insiders?
An insider sold Dragon Mining shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. When you combine this with the relatively low insider ownership, we are very cautious about the stock. So we're not rushing to buy, to say the least. Along with insider transactions, I recommend checking if Dragon Mining is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course Dragon Mining may not be the best stock to buy. So you may wish to see this free collection of high quality 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 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.