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Hang Lung Properties Limited, an investment holding company, engages in the property investment, development, and management activities in Hong Kong and Mainland China. Hang Lung Properties is one of Hong Kong’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 15 million shares during this period. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.
View our latest analysis for Hang Lung Properties
Which Insiders Are Buying?
More shares have been bought than sold by Hang Lung Properties insiders in the past three months. In total, individual insiders own over 55 million shares in the business, which makes up around 1.22% of total shares outstanding. The insider that recently bought more shares is Wenbwo Chan (management and board member) .
The entity that bought on the open market in the last three months was
Hang Lung Group Limited. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is This Consistent With Future Growth?
On the surface, analysts’ earnings growth projection of -39.57% over the next three years provides poor outlook for the company, however, this is contrary to the signal company insiders are sending with their net buying activity. Probing further into annual growth rates,analysts anticipate decline in top-line growth next year, which could imply some headwinds going forward. This is expected to impact its bottom line next year given the large negative growth rate expected, implying cost management may not be effective enough to bring the company into positive earnings growth. However, company insiders appear to know something the market doesn’t and have been investing more money into the stock. This may mean they believe in a turnaround or believe the stock is well-undervalued by negative market sentiment.
Can Share Price Volatility Explain The Buy?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. In the past three months, Hang Lung Properties’s share price reached a high of HK$21.65 and a low of HK$18. This suggests some volatility with a share price change of of 20.28%. Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal portfolio rebalancing.