The recent price decline of 10% in Far East Hotels and Entertainment Limited's (HKG:37) stock may have disappointed insiders who bought HK$6.38m worth of shares at an average price of HK$0.53 in the past 12 months. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth HK$4.63m, which is not what they expected.
Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
The Last 12 Months Of Insider Transactions At Far East Hotels and Entertainment
In the last twelve months, the biggest single purchase by an insider was when Chairman Derek Chiu bought HK$6.4m worth of shares at a price of HK$0.53 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.39). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Derek Chiu was the only individual insider to buy shares in the last twelve months.
The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
View our latest analysis for Far East Hotels and Entertainment
There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).
Does Far East Hotels and Entertainment 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. We usually like to see fairly high levels of insider ownership. Insiders own 30% of Far East Hotels and Entertainment shares, worth about HK$86m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Far East Hotels and Entertainment Insider Transactions Indicate?
The fact that there have been no Far East Hotels and Entertainment insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Far East Hotels and Entertainment insiders are doubting the company, and they do own shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. To that end, you should learn about the 3 warning signs we've spotted with Far East Hotels and Entertainment (including 1 which doesn't sit too well with us) .
But note: Far East Hotels and Entertainment 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.