We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Nan Hai Corporation Limited (HKG:680), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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 don’t think shareholders should simply follow insider transactions. 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.’
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The Last 12 Months Of Insider Transactions At Nan Hai
Executive Chairman Pun Hoi Yu made the biggest insider purchase in the last 12 months. That single transaction was for HK$4.5m worth of shares at a price of HK$0.18 each. So it’s clear an insider wanted to buy, even at a higher price. 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. It’s not at all bad to see insiders buy shares at or above current prices. The only individual insider to buy over the last year was Pun Hoi Yu.
Pun Hoi Yu purchased 76.55m shares over the year. The average price per share was HK$0.19. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Nan Hai better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Nan Hai Boast High Insider Ownership?
Many investors like to check how much of a company is owned by 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. It’s great to see that Nan Hai insiders own 53% of the company, worth about HK$5.9b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.