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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 China Flavors and Fragrances Company Limited (HKG:3318), 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.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'

View our latest analysis for China Flavors and Fragrances

China Flavors and Fragrances Insider Transactions Over The Last Year

Chairman & CEO Ming Fan Wang made the biggest insider purchase in the last 12 months. That single transaction was for HK$3.5m worth of shares at a price of HK$2.62 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$2.10). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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. The only individual insider to buy over the last year was Ming Fan Wang.

The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

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. Insiders own 19% of China Flavors and Fragrances shares, worth about HK$347m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About China Flavors and Fragrances Insiders?

It doesn't really mean much that no insider has traded China Flavors and Fragrances shares in the last quarter. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like China Flavors and Fragrances insiders think the business has merit. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

Of course China Flavors and Fragrances may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.