We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in China Sanjiang Fine Chemicals Company Limited (HKG:2198).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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 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'.
China Sanjiang Fine Chemicals Insider Transactions Over The Last Year
Founder & Chairman Jianzhong Guan made the biggest insider purchase in the last 12 months. That single transaction was for HK$15m worth of shares at a price of HK$1.49 each. That means that an insider was happy to buy shares at above the current price of HK$1.37. 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. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Jianzhong Guan was the only individual insider to buy shares in the last twelve months.
Jianzhong Guan purchased 15642000 shares over the year. The average price per share was HK$1.54. 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!
China Sanjiang Fine Chemicals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does China Sanjiang Fine Chemicals Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From looking at our data, insiders own HK$22m worth of China Sanjiang Fine Chemicals stock, about 1.4% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We consider this fairly low insider ownership.
So What Do The China Sanjiang Fine Chemicals Insider Transactions Indicate?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest China Sanjiang Fine Chemicals insiders are well aligned, and that they may think the share price is too low. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for China Sanjiang Fine Chemicals.
Of course China Sanjiang Fine Chemicals 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.