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 before you buy or sell Telecom Service One Holdings Limited (HKG:3997), 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 on the market. However, most countries require that the company discloses such transactions to the market.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’

View our latest analysis for Telecom Service One Holdings

Telecom Service One Holdings Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director King Cheung bought HK$1.1m worth of shares at a price of HK$2.43 per share. So it’s clear an insider wanted to buy, at around the current price. Of course they may have changed their mind. But this suggests they are optimistic. In any event it’s generally a positive if insiders are buying shares at around the current price.

Happily, we note that in the last year insiders bought 2.49m shares for a total of HK$6.0m. In total, Telecom Service One Holdings insiders bought more than they sold over the last year. They paid about HK$2.42 on average. These transactions show that insiders have confidence to invest their own money in the stock, albeit at slightly below the recent price of HK$2.90. You can see a visual depiction of insider transactions 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!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Telecom Service One Holdings insiders own about HK$77m worth of shares (which is 21% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Telecom Service One Holdings Insiders?

The fact that there have been no Telecom Service One Holdings insider transactions recently certainly doesn’t bother us. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Telecom Service One Holdings and their transactions don’t cause us concern. Along with insider transactions, I recommend checking if Telecom Service One Holdings is growing revenue. This free chart of historic revenue and earnings should make that easy.

Of course Telecom Service One Holdings may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.