We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 AK Medical Holdings Limited (HKG:1789).
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 AK Medical Holdings
The Senior VP & Executive Director, Chaoyang Zhang, made the biggest insider sale in the last 12 months. That single transaction was for HK$3.7m worth of shares at a price of HK$5.43 each. So it's clear an insider wanted to take some cash off the table, even below the current price of HK$7.12. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 1% of Chaoyang Zhang's holding. Chaoyang Zhang was the only individual insider to sell shares in the last twelve months.
Chaoyang Zhang ditched 1.6m shares over the year. The average price per share was CN¥5.32. 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!
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).
Does AK Medical Holdings Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that AK Medical Holdings insiders own 63% of the company, worth about HK$4.7b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The AK Medical Holdings Insider Transactions Indicate?
It doesn't really mean much that no insider has traded AK Medical Holdings shares in the last quarter. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of AK Medical Holdings insider transactions don't fill us with confidence. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
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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.