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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 GSH Corporation Limited (SGX:BDX), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
View our latest analysis for GSH
GSH Insider Transactions Over The Last Year
Executive Chairman Seng Hui Goi made the biggest insider purchase in the last 12 months. That single transaction was for S$11m worth of shares at a price of S$0.29 each. That means that even when the share price was higher than S$0.29 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. 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. Seng Hui Goi was the only individual insider to buy shares in the last twelve months.
Seng Hui Goi purchased 64.38m shares over the year. The average price per share was S$0.29. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
GSH is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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. A high insider ownership often makes company leadership more mindful of shareholder interests. GSH insiders own about S$405m worth of shares (which is 69% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.