It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell K. Wah International Holdings Limited (HKG:173), you may well want to know whether insiders have been buying or selling.

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, 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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.

View our latest analysis for K. Wah International Holdings

K. Wah International Holdings Insider Transactions Over The Last Year

Chairman Che-Woo Lui made the biggest insider purchase in the last 12 months. That single transaction was for HK$5.5m worth of shares at a price of HK$4.17 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$3.80). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. 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. Che-Woo Lui was the only individual insider to buy over the year.

Che-Woo Lui bought a total of 11.34m shares over the year at an average price of HK$4.14. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

K. Wah International Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Does K. Wah International Holdings Boast High Insider Ownership?

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. K. Wah International Holdings insiders own 53% of the company, currently worth about HK$6.5b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.