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 Hwa Hong Corporation Limited (SGX:H19), 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.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Hwa Hong
insider Kay Eng Ong made the biggest insider purchase in the last 12 months. That single transaction was for S$99k worth of shares at a price of S$0.33 each. That means that even when the share price was higher than S$0.32 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Over the last year, we can see that insiders have bought 4917800 shares worth S$1.5m. On the other hand they divested 70500 shares, for S$22k. Overall, Hwa Hong insiders were net buyers 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!
Hwa Hong is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Hwa Hong Insiders Bought Stock Recently
Over the last quarter, Hwa Hong insiders have spent a meaningful amount on shares. We can see that insider Eng Ong paid S$407k for shares in the company. No-one sold. This is a positive in our book as it implies some confidence.
Does Hwa Hong Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Hwa Hong insiders own 32% of the company, worth about S$66m. 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 Do The Hwa Hong Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Insiders likely see value in Hwa Hong shares, given these transactions (along with notable insider ownership of the company). I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
Of course Hwa Hong 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 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. Thank you for reading.