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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Food Idea Holdings Limited (HKG:8179), you may well want to know whether insiders have been buying or selling.
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, such insiders must disclose their trading activities, and not trade on inside information.
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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
See our latest analysis for Food Idea Holdings
Food Idea Holdings Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Wei Huang bought HK$56m worth of shares at a price of HK$0.13 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.037). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
In the last twelve months insiders purchased 433.9m shares for HK$57m. On the other hand they divested 179.9m shares, for HK$25m. In the last twelve months there was more buying than selling by Food Idea Holdings insiders. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Food Idea Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Food Idea Holdings
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. It appears that Food Idea Holdings insiders own 37% of the company, worth about HK$37m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.