It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell The Bank of East Asia, Limited (HKG:23), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.

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The Last 12 Months Of Insider Transactions At Bank of East Asia

Deputy Chief Executive & Executive Director Man-Kiu Li made the biggest insider sale in the last 12 months. That single transaction was for HK$7.4m worth of shares at a price of HK$34.05 each. That is hardly a positive sign, even though it took place above the latest price (HK$25.80). So it may not tell us anything about how insiders feel about the current share price.

Over the last year, we can see that insiders have bought 245.70k shares worth HK$7.6m. But they sold 432.00k for HK$15m. Over the last year we saw more insider selling of Bank of East Asia shares, than buying. The sellers received a price of around HK$34.13, on average. Insider selling doesn’t make us excited to buy. But we note that the selling, on average, was at well above the recently traded price of HK$25.80. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insider Ownership of Bank of East Asia

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Bank of East Asia insiders own 6.8% of the company, currently worth about HK$5.0b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The Bank of East Asia Insider Transactions Indicate?

The fact that there have been no Bank of East Asia insider transactions recently certainly doesn’t bother us. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the Bank of East Asia insiders selling. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.