While China Renaissance Holdings Limited (HKG:1911) shareholders have enjoyed a good week with stock up 14%, they need remain vigilant. The fact that insiders chose to dispose of CN¥7.5m worth of stock in the past 12 months even though prices were relatively low could be indicative of some anticipated weakness.
Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
The insider, Fan Bao, made the biggest insider sale in the last 12 months. That single transaction was for HK$7.5m worth of shares at a price of HK$4.24 each. That means that an insider was selling shares at slightly below the current price (HK$4.70). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 7.3% of Fan Bao's holding. Fan Bao was the only individual insider to sell over the last year.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
View our latest analysis for China Renaissance Holdings
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.
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. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that China Renaissance Holdings insiders own 4.6% of the company, worth about HK$123m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
The fact that there have been no China Renaissance Holdings insider transactions recently certainly doesn't bother us. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of China Renaissance Holdings insider transactions don't fill us with confidence. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with China Renaissance Holdings and understanding it should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.