It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Greater China Financial Holdings Limited (HKG:431).
Do Insider Transactions Matter?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Greater China Financial Holdings
insider Lam Yiu Chu made the biggest insider purchase in the last 12 months. That single transaction was for HK$88m worth of shares at a price of HK$0.20 each. That implies that an insider found the current price of HK$0.21 per share to be enticing. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. Happily, the Greater China Financial Holdings insider decided to buy shares at close to current prices. The only individual insider to buy over the last year was Lam Yiu Chu.
The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Greater China Financial Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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. We usually like to see fairly high levels of insider ownership. It appears that Greater China Financial Holdings insiders own 40% of the company, worth about HK$567m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Greater China Financial Holdings Tell Us?
It's certainly positive to see the recent insider purchase. 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. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Greater China Financial Holdings. That's what I like to see! Along with insider transactions, I recommend checking if Greater China Financial Holdings is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Greater China Financial Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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 firstname.lastname@example.org. 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.
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. Thank you for reading.