We often see insiders buying up shares in companies that perform well over the long term. 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 PCCW Limited (HKG:8), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 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.’

See our latest analysis for PCCW

The Last 12 Months Of Insider Transactions At PCCW

Group MD & Executive Director Srinivas Gangaiah made the biggest insider sale in the last 12 months. That single transaction was for HK$3.3m worth of shares at a price of HK$4.72 each. So what is clear is that an insider saw fit to sell at around the current price of HK$4.61. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price. Srinivas Gangaiah was the only individual insider to sell over the last year.

Srinivas Gangaiah divested 1.20m shares over the last 12 months at an average price of HK$4.70. The chart below shows insider transactions over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

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

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. PCCW insiders own 6.4% of the company, currently worth about HK$2.2b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About PCCW Insiders?

It doesn’t really mean much that no insider has traded PCCW shares in the last quarter. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the PCCW insiders selling. Of course, the future is what matters most. So if you are interested in PCCW, you should check out this free report on analyst forecasts for the company.

Of course PCCW 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.