The recent price decline of 14% in Greater China Financial Holdings Limited's (HKG:431) stock may have disappointed insiders who bought HK$2.37m worth of shares at an average price of HK$0.12 in the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only HK$1.70m.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.
View our latest analysis for Greater China Financial Holdings
The Last 12 Months Of Insider Transactions At Greater China Financial Holdings
The Executive Chairman Kequan Liu made the biggest insider purchase in the last 12 months. That single transaction was for HK$1.2m worth of shares at a price of HK$0.12 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.085). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. 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. Kequan Liu was the only individual insider to buy during the last year.
Kequan Liu bought a total of 20.00m shares over the year at an average price of HK$0.12. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.
Insider Ownership
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Greater China Financial Holdings insiders own 49% of the company, worth about HK$322m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Greater China Financial Holdings Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Greater China Financial Holdings insiders think the business has merit. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Be aware that Greater China Financial Holdings is showing 3 warning signs in our investment analysis, and 2 of those are significant...
But note: Greater China Financial Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.