Central Development Holdings' Market Cap Drops To HK$150m Leaving Insiders With Losses

The recent price decline of 13% in Central Development Holdings Limited's (HKG:475) stock may have disappointed insiders who bought HK$35.0m worth of shares at an average price of HK$0.40 in the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth HK$26.3m which is not ideal.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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Central Development Holdings Insider Transactions Over The Last Year

The Executive Director Yangjun Hu made the biggest insider purchase in the last 12 months. That single transaction was for HK$35m worth of shares at a price of HK$0.40 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$0.30). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. 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 Yangjun Hu.

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!

See our latest analysis for Central Development Holdings

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.

Does Central Development Holdings Boast High 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 23% of Central Development Holdings shares, worth about HK$34m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About Central Development Holdings Insiders?

It doesn't really mean much that no insider has traded Central Development Holdings shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Central Development Holdings and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 3 warning signs for Central Development Holdings (1 is significant!) and we strongly recommend you look at them before investing.

But note: Central Development 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 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.