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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 shareholders might well want to know whether insiders have been buying or selling shares in Yongsheng Advanced Materials Company Limited (HKG:3608).
Do Insider Transactions Matter?
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 Yongsheng Advanced Materials
The Last 12 Months Of Insider Transactions At Yongsheng Advanced Materials
In the last twelve months, the biggest single sale by an insider was when CEO & Executive Director Jidong Zhao sold HK$3.4m worth of shares at a price of HK$2.74 per share. That means that even when the share price was slightly below the current price of HK$2.79, an insider wanted to cash in some shares. While sellers have a variety of reasons for selling, this isn’t particularly great to see. As a general rule we consider it to be discouraging when insiders are selling below the current price. We note that the biggest single sale was only 27.4% of Jidong Zhao’s holding. Jidong Zhao was the only individual insider to sell over the last year.
Jidong Zhao divested 1.32m shares over the last 12 months at an average price of CN¥2.75. 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!
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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. Yongsheng Advanced Materials insiders own about HK$588m worth of shares. That equates to 38% of the company. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.