We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Asia Financial Holdings Limited (HKG:662).
Do Insider Transactions Matter?
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Asia Financial Holdings Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by President & Executive Director Charnwut Chan for HK$2.3m worth of shares, at about HK$4.47 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$3.98). 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. 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. Charnwut Chan was the only individual insider to buy shares in the last twelve months.
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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Asia Financial Holdings
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data suggests Asia Financial Holdings insiders own 0.7% of the company, worth about HK$27m. However, it's possible that insiders might have an indirect interest through a more complex structure. We consider this fairly low insider ownership.
So What Do The Asia Financial Holdings Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Asia Financial Holdings and we see no evidence to suggest they are worried about the future. Along with insider transactions, I recommend checking if Asia Financial Holdings is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Asia 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 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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