Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Cool Link (Holdings) Limited (HKG:8491).
Do Insider Transactions Matter?
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.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Cool Link (Holdings) Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the , Chu En Tan, for HK$14m worth of shares, at about HK$0.90 per share. That means that even when the share price was below the current price of HK$1.73, 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. 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. This single sale was just 33.3% of Chu En Tan's stake.
Over the last year, we can see that insiders have bought 10.6m shares worth HK$12m. But they sold 47.5m for HK$41m. In total, Cool Link (Holdings) insiders sold more than they bought over the last year. The average sell price was around S$0.87. We don't gain confidence from insider selling below the recent share price. Since insiders sell for many reasons, we wouldn't put too much weight on it. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Cool Link (Holdings) Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at Cool Link (Holdings). Jintao Meng spent S$7.6m on stock, and there wasn't any selling. This is a positive in our book as it implies some confidence.
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. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 16% of Cool Link (Holdings) shares, worth about HK$165m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Cool Link (Holdings) Tell Us?
The recent insider purchase is heartening. However, the longer term transactions are not so encouraging. The recent buying by an insider, along with high insider ownership, suggest that Cool Link (Holdings) insiders are fairly aligned, and optimistic. Along with insider transactions, I recommend checking if Cool Link (Holdings) is growing revenue. This free chart of historic revenue and earnings should make that easy.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.