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Should You Be Worried About Insider Transactions At China Healthcare Enterprise Group Limited (HKG:1143)?

Simply Wall St

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 China Healthcare Enterprise Group Limited (HKG:1143).

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. 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'.

See our latest analysis for China Healthcare Enterprise Group

China Healthcare Enterprise Group Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, Jin Cai, for HK$3.8m worth of shares, at about HK$0.10 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is HK$0.08. So it may not shed much light on insider confidence at current levels. Jin Cai was the only individual insider to sell over the last year.

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!

SEHK:1143 Recent Insider Trading, November 1st 2019

I will like China Healthcare Enterprise Group better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insiders at China Healthcare Enterprise Group Have Sold Stock Recently

The last quarter saw substantial insider selling of China Healthcare Enterprise Group shares. Specifically, insider Jin Cai ditched HK$3.8m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership of China Healthcare Enterprise Group

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that China Healthcare Enterprise Group insiders own 54% of the company, worth about HK$264m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At China Healthcare Enterprise Group Tell Us?

An insider sold stock recently, but they haven't been buying. And even if we look to the last year, we didn't see any purchases. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.