Insiders Find Solace Selling HK$4.1m In Stock With China Health Group's Price Down 21%

Insiders at China Health Group Limited (HKG:673) sold HK$4.1m worth of stock at an average price of HK$0.10 a share over the past year, making the most of their investment. The company's market worth decreased by HK$153m over the past week after the stock price dropped 21%, although insiders were able to minimize their losses

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

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The Last 12 Months Of Insider Transactions At China Health Group

Over the last year, we can see that the biggest insider sale was by the insider, Fan Zhang, for HK$4.1m worth of shares, at about HK$0.10 per share. That means that even when the share price was below the current price of HK$0.42, an insider wanted to cash in some shares. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 19% of Fan Zhang's holding. The only individual insider seller over the last year was Fan Zhang.

In the last twelve months insiders purchased 5.76m shares for HK$576k. But they sold 41.38m shares for HK$4.1m. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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Insider Ownership Of China Health Group

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. China Health Group insiders own 65% of the company, currently worth about HK$379m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The China Health Group Insider Transactions Indicate?

The fact that there have been no China Health Group insider transactions recently certainly doesn't bother us. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the China Health Group insiders selling. 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. For example, China Health Group has 4 warning signs (and 3 which are a bit unpleasant) we think you should know about.

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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.