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 we'll take a look at whether insiders have been buying or selling shares in Eminence Enterprise Limited (HKG:616).
What Is Insider Buying?
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 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. 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.
Eminence Enterprise Insider Transactions Over The Last Year
insider Rong Hu made the biggest insider purchase in the last 12 months. That single transaction was for HK$3.5m worth of shares at a price of HK$0.081 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.024). 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. The only individual insider to buy over the last year was Rong Hu.
Rong Hu bought a total of 334725000 shares over the year at an average price of HK$0.049. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
Eminence Enterprise is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Eminence Enterprise Have Sold Stock Recently
There was substantially more insider selling, than buying, of Eminence Enterprise shares over the last three months. In total, insider Tien Tui Chen sold HK$7.1m worth of shares in that time. On the other hand we note insider Rong Hu bought HK$3.3m worth of shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the company has been fully valued in recent months.
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 31% of Eminence Enterprise shares, worth about HK$28m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Eminence Enterprise Insiders?
Unfortunately, there has been more insider selling of Eminence Enterprise stock, than buying, in the last three months. On the other hand, the insider transactions over the last year are encouraging. We like that insiders own a fair amount of the company. So the recent selling doesn't worry us too much. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free.
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. 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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