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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 before you buy or sell Sinosoft Technology Group Limited (HKG:1297), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

Insider transactions are not the most important thing when it comes to long-term investing. 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.'

Check out our latest analysis for Sinosoft Technology Group

The Last 12 Months Of Insider Transactions At Sinosoft Technology Group

Over the last year, we can see that the biggest insider purchase was by Chairlady & CEO Yingmei Xin for HK$2.9m worth of shares, at about HK$2.66 per share. That means that an insider was happy to buy shares at above the current price of HK$2.18. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares is very important. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. The only individual insider to buy over the last year was Yingmei Xin.

Yingmei Xin bought 3.6m shares over the last 12 months at an average price of HK$2.55. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

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. We usually like to see fairly high levels of insider ownership. It's great to see that Sinosoft Technology Group insiders own 47% of the company, worth about HK$1.3b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Sinosoft Technology Group Insiders?

It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest Sinosoft Technology Group insiders are well aligned, and quite possibly think the share price is too low. One for the watchlist, at least! Of course, the future is what matters most. So if you are interested in Sinosoft Technology Group, you should check out this free report on analyst forecasts for the company.

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.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.

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 editorial-team@simplywallst.com. 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.