We often see insiders buying up shares in companies that perform well over the long term. 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 U Banquet Group Holding Limited (HKG:1483).
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 in the company. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. 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.
U Banquet Group Holding Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Yanying Ma bought HK$179m worth of shares at a price of HK$1.53 per share. That means that an insider was happy to buy shares at around the current price of HK$1.87. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. The good news for U Banquet Group Holding share holders is that an insider was buying at near the current price. The only individual insider to buy over the last year was Yanying Ma.
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!
U Banquet Group Holding is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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. A high insider ownership often makes company leadership more mindful of shareholder interests. U Banquet Group Holding insiders own 58% of the company, currently worth about HK$768m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About U Banquet Group Holding Insiders?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Once you factor in the high insider ownership, it certainly seems like insiders are positive about U Banquet Group Holding. Looks promising! Along with insider transactions, I recommend checking if U Banquet Group Holding is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: U Banquet Group Holding may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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