We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Lee's Pharmaceutical Holdings Limited (HKG:950).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
Lee's Pharmaceutical Holdings Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when CEO, CTO & Executive Director Xiaoyi Li bought HK$1.9m worth of shares at a price of HK$5.82 per share. That means that even when the share price was higher than HK$3.89 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. 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. Xiaoyi Li was the only individual insider to buy over the year.
Xiaoyi Li bought 1.5m shares over the last 12 months at an average price of HK$6.02. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Lee's Pharmaceutical Holdings
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Lee's Pharmaceutical Holdings insiders own 11% of the company, worth about HK$254m. 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 Do The Lee's Pharmaceutical Holdings Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Lee's Pharmaceutical Holdings shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like Lee's Pharmaceutical Holdings insiders think the business has merit. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Lee's Pharmaceutical Holdings.
But note: Lee's Pharmaceutical 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.
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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. Thank you for reading.