The recent 12% drop in Tomson Group Limited's (HKG:258) stock could come as a blow to insiders who purchased HK$96m worth of stock at an average buy price of HK$1.93 over the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only HK$70m.

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.

View our latest analysis for Tomson Group

The Last 12 Months Of Insider Transactions At Tomson Group

Over the last year, we can see that the biggest insider purchase was by MD & Chairman Feng Hsu for HK$58m worth of shares, at about HK$1.93 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$1.42). 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 insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months Tomson Group insiders were buying shares, but not selling. 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!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At Tomson Group Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Tomson Group. Not only was there no selling that we can see, but they collectively bought HK$96m worth of shares. This could be interpreted as suggesting a positive outlook.

Does Tomson Group Boast High Insider Ownership?

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. Tomson Group insiders own 74% of the company, currently worth about HK$2.1b 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 Tomson Group Insider Transactions Indicate?

The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. When combined with notable insider ownership, these factors suggest Tomson Group insiders are well aligned, and quite possibly think the share price is too low. Looks promising! So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For instance, we've identified 2 warning signs for Tomson Group (1 makes us a bit uncomfortable) you should be aware of.

But note: Tomson Group 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, but not derivative transactions.

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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.