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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 Cosmopolitan International Holdings Limited (HKG:120).
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, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. 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.
Check out our latest analysis for Cosmopolitan International Holdings
The Last 12 Months Of Insider Transactions At Cosmopolitan International Holdings
Over the last year, we can see that the biggest insider purchase was by insider Yebi Hu for HK$417m worth of shares, at about HK$1.50 per share. That means that even when the share price was higher than HK$1.23 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Yebi Hu was the only individual insider to buy shares in the last twelve months.
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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Cosmopolitan International Holdings
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. I reckon it's a good sign if insiders own a significant number of shares in the company. Our information indicates that Cosmopolitan International Holdings insiders own about HK$4.4m worth of shares. But they may have an indirect interest through a corporate structure that we haven't picked up on. This level of insider ownership is notably low, and not very encouraging.