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It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell China Shengmu Organic Milk Limited (HKG:1432), 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, rules govern insider transactions, and certain disclosures are required.
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.'
View our latest analysis for China Shengmu Organic Milk
The Last 12 Months Of Insider Transactions At China Shengmu Organic Milk
The President, Jianye Wu, made the biggest insider sale in the last 12 months. That single transaction was for HK$33m worth of shares at a price of HK$0.33 each. That means that an insider was selling shares at around the current price of HK$0.33. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
Over the last year we saw more insider selling of China Shengmu Organic Milk shares, than buying. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like China Shengmu Organic Milk 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 China Shengmu Organic Milk Boast High 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. China Shengmu Organic Milk insiders own about HK$612m worth of shares. That equates to 30% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About China Shengmu Organic Milk Insiders?
It doesn't really mean much that no insider has traded China Shengmu Organic Milk shares in the last quarter. It's great to see high levels of insider ownership, but looking back at the last year, we don't gain confidence from the China Shengmu Organic Milk insiders selling. 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.