We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Kin Pang Holdings Limited (HKG:1722).
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, most countries require that the company discloses such transactions to the market.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Kin Pang Holdings
Chairman & CEO Kin Kong made the biggest insider purchase in the last 12 months. That single transaction was for HK$1.4m worth of shares at a price of HK$0.38 each. That means that an insider was happy to buy shares at above the current price of HK$0.15. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. The only individual insider to buy over the last year was Kin Kong.
Kin Kong purchased 5.99m shares over the year. The average price per share was HK$0.38. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Kin Pang Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Kin Pang Holdings
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data isn't picking up on much insider ownership at Kin Pang Holdings, though insiders do hold about HK$910k worth of shares. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We might be missing something but that seems like very low insider ownership.
What Might The Insider Transactions At Kin Pang Holdings Tell Us?
It doesn't really mean much that no insider has traded Kin Pang Holdings shares in the last quarter. However, our analysis of transactions over the last year is heartening. The transactions are fine but it'd be more encouraging if Kin Pang Holdings insiders bought more shares in the company. Along with insider transactions, I recommend checking if Kin Pang Holdings is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Kin Pang 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.
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