We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell NetDragon Websoft Holdings Limited (HKG:777), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.'
The Last 12 Months Of Insider Transactions At NetDragon Websoft Holdings
Over the last year, we can see that the biggest insider sale was by the Independent Non-Executive Director, Guowei Chao, for HK$12m worth of shares, at about HK$22.57 per share. That means that an insider was selling shares at around the current price of HK$20.10. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
In total, NetDragon Websoft Holdings insiders sold more than they bought over the last year. 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!
I will like NetDragon Websoft Holdings better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of NetDragon Websoft Holdings
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. NetDragon Websoft Holdings insiders own about HK$5.4b worth of shares (which is 50% 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 Does This Data Suggest About NetDragon Websoft Holdings Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. While we feel good about high insider ownership of NetDragon Websoft Holdings, we can't say the same about the selling of shares. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for NetDragon Websoft Holdings.
But note: NetDragon Websoft 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.