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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we’ll take a look at whether insiders have been buying or selling shares in Dragon Mining Limited (HKG:1712).
Do Insider Transactions Matter?
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, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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.’
Check out our latest analysis for Dragon Mining
The Last 12 Months Of Insider Transactions At Dragon Mining
Over the last year, we can see that the biggest insider purchase was by Yau Lau for HK$17m worth of shares, at about HK$1.00 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. We generally consider it a positive if insiders have been buying on market, even if the share price has increased a bit since then.
In the last twelve months insiders purchased 16.55m shares for HK$17m. But insiders sold 16.53m shares worth HK$17m. In total, Dragon Mining insiders bought more than they sold over the last year. They paid about HK$1.00 on average. It’s great to see insiders putting their own cash into the company’s stock, albeit at below the recent share price (HK$1.06). The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Dragon Mining
For a common shareholder, it is worth checking how many shares are held by company 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 24% of Dragon Mining shares, worth about HK$35m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.