Insiders Re-Evaluate Their HK$382.8m Stock Purchase As CAI Falls To HK$600m
The recent price decline of 20% in CAI Corp's (HKG:80) stock may have disappointed insiders who bought HK$382.8m worth of shares at an average price of HK$0.35 in the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth HK$211.5m, which is not great.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.
The Last 12 Months Of Insider Transactions At CAI
In the last twelve months, the biggest single purchase by an insider was when insider Wen Sheng Cai bought HK$142m worth of shares at a price of HK$0.33 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.19). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Wen Sheng Cai was the only individual insider to buy shares in the last twelve months. We note that Wen Sheng Cai was both the biggest buyer and the biggest seller.
Wen Sheng Cai bought 1.09b shares over the last 12 months at an average price of HK$0.35. The chart below shows insider transactions (by companies and 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!
See our latest analysis for CAI
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.
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. I reckon it's a good sign if insiders own a significant number of shares in the company. CAI insiders own about HK$405m worth of shares (which is 67% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At CAI Tell Us?
The recent insider purchase is heartening. And the longer term insider transactions also give 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 CAI insiders are well aligned, and quite possibly think the share price is too low. One for the watchlist, at least! While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Every company has risks, and we've spotted 4 warning signs for CAI (of which 3 are a bit unpleasant!) you should know about.
But note: CAI 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 currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.
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