We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Luks Group (Vietnam Holdings) Company Limited (HKG:366), you may well want to know whether insiders have been buying or selling.
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.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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 Luks Group (Vietnam Holdings)
In the last twelve months, the biggest single purchase by an insider was when Chairman & CEO Cheung Cheng bought HK$425k worth of shares at a price of HK$1.77 per share. That means that even when the share price was higher than HK$1.64 (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. 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. Cheung Cheng was the only individual insider to buy shares in the last twelve months.
Cheung Cheng purchased 346000 shares over the year. The average price per share was HK$1.75. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Luks Group (Vietnam Holdings) is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
For a common shareholder, it is worth checking how many shares are held by company 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. Luks Group (Vietnam Holdings) insiders own about HK$116m worth of shares. That equates to 14% of the company. 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 Luks Group (Vietnam Holdings) Insider Transactions Indicate?
The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. When combined with notable insider ownership, these factors suggest Luks Group (Vietnam Holdings) insiders are well aligned, and quite possibly think the share price is too low. That's what I like to see! Along with insider transactions, I recommend checking if Luks Group (Vietnam Holdings) is growing revenue. This free chart of historic revenue and earnings should make that easy.
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.
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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