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 Sansheng Holdings (Group) Co. Ltd. (HKG:2183), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
Sansheng Holdings (Group) Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Executive Chairman Rongbin Lin for HK$231m worth of shares, at about HK$10.50 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$9.25). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Rongbin Lin was the only individual insider to buy over the 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!
Sansheng Holdings (Group) 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.
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Sansheng Holdings (Group) insiders own about HK$3.4b worth of shares (which is 83% 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 Sansheng Holdings (Group) Insider Transactions Indicate?
The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Sansheng Holdings (Group) insiders are well aligned, and quite possibly think the share price is too low. Nice! Along with insider transactions, I recommend checking if Sansheng Holdings (Group) is growing revenue. This free chart of historic revenue and earnings should make that easy.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
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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