Despite a 10.0% gain in Tongguan Gold Group Limited's (HKG:340) stock price this week, shareholders shouldn't let up. In spite of the relatively cheap prices, insiders made the decision to sell HK$12m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.
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.
Our free stock report includes 2 warning signs investors should be aware of before investing in Tongguan Gold Group. Read for free now.Tongguan Gold Group Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the insider, Dengguang Chen, sold HK$12m worth of shares at a price of HK$1.07 per share. That means that even when the share price was below the current price of HK$1.32, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 5.5% of Dengguang Chen's stake. The only individual insider seller over the last year was Dengguang Chen.
The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
See our latest analysis for Tongguan Gold Group
If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.
Insiders At Tongguan Gold Group Have Sold Stock Recently
The last three months saw significant insider selling at Tongguan Gold Group. In total, insider Dengguang Chen sold HK$12m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Tongguan Gold Group Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Tongguan Gold Group insiders own 30% of the company, worth about HK$1.7b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Tongguan Gold Group Tell Us?
An insider sold Tongguan Gold Group shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. But it is good to see that Tongguan Gold Group is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For instance, we've identified 2 warning signs for Tongguan Gold Group (1 is potentially serious) you should be aware of.
But note: Tongguan Gold Group 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.