It is not uncommon to see companies perform well in the years after insiders buy shares. 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 PCCW Limited (HKG:8), 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 on the market. However, rules govern insider transactions, and certain disclosures are required.
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 PCCW
The Group MD & Executive Director, Srinivas Gangaiah, made the biggest insider sale in the last 12 months. That single transaction was for HK$6.7m worth of shares at a price of HK$4.74 each. So what is clear is that an insider saw fit to sell at around the current price of HK$4.57. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive). Srinivas Gangaiah was the only individual insider to sell shares in the last twelve months.
Srinivas Gangaiah divested 2.2m shares over the last 12 months at an average price of HK$4.73. 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 like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
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. PCCW insiders own about HK$1.5b worth of shares (which is 4.1% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The PCCW Insider Transactions Indicate?
It doesn't really mean much that no insider has traded PCCW shares in the last quarter. While we feel good about high insider ownership of PCCW, we can't say the same about the selling of shares. Of course, the future is what matters most. So if you are interested in PCCW, you should check out this free report on analyst forecasts for the company.
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.
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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.