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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 shareholders might well want to know whether insiders have been buying or selling shares in Link Real Estate Investment Trust (HKG:823).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
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Link Real Estate Investment Trust Insider Transactions Over The Last Year
The CEO & Executive Director of Link Asset Management Limited, Kwok Lung Hongchoy, made the biggest insider sale in the last 12 months. That single transaction was for HK$61m worth of shares at a price of HK$76.75 each. So it's clear an insider wanted to take some cash off the table, even below the current price of HK$98.15. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 28% of Kwok Lung Hongchoy's holding. Kwok Lung Hongchoy was the only individual insider to sell shares in the last twelve months.
Kwok Lung Hongchoy sold a total of 1.5m shares over the year at an average price of HK$76.84. 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!
I will like Link Real Estate Investment Trust 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 Link Real Estate Investment Trust Boast High Insider Ownership?
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Link Real Estate Investment Trust insiders own about HK$251m worth of shares. That equates to 0.1% 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.