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We often see insiders buying up shares in companies that perform well over the long term. 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 Code Agriculture (Holdings) Limited (HKG:8153).

What Is Insider Buying?

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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.'

View our latest analysis for Code Agriculture (Holdings)

Code Agriculture (Holdings) Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Dequn Wang bought HK$9.0m worth of shares at a price of HK$0.06 per share. That means that an insider was happy to buy shares at above the current price of HK$0.022. 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 is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

Over the last year, we can see that insiders have bought 290.8m shares worth HK$16m. On the other hand they divested 109.3m shares, for HK$3.4m. Overall, Code Agriculture (Holdings) insiders were net buyers last year. The chart below shows insider transactions (by 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!

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).

Code Agriculture (Holdings) Insiders Bought Stock Recently

Over the last three months, we've seen significantly more insider buying, than insider selling, at Code Agriculture (Holdings). We can see that Chairman Gang Qian paid HK$5.0m for shares in the company. But we did see Kai Ming Tsang sell shares worth HK$1.5m. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Code Agriculture (Holdings) insiders own 46% of the company, worth about HK$36m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Code Agriculture (Holdings) Insiders?

The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Code Agriculture (Holdings) insiders are well aligned, and quite possibly think the share price is too low. Looks promising! To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

But note: Code Agriculture (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 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.