Last week, XD Inc. (HKG:2400) insiders, who had purchased shares in the previous 12 months were rewarded handsomely. The shares increased by 11% last week, resulting in a HK$737m increase in the company's market worth, implying a 102% gain on their initial purchase. As a result, their original purchase of CN¥3.21m worth of stock is now worth CN¥6.47m.
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 XD
Over the last year, we can see that the biggest insider purchase was by Founder Yunjie Dai for HK$2.3m worth of shares, at about HK$7.57 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of HK$15.40. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
In the last twelve months XD insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. 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).
Insider Ownership
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. XD insiders own about HK$3.3b worth of shares (which is 46% of the company). 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 XD Insider Transactions Indicate?
It doesn't really mean much that no insider has traded XD shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like XD insiders think the business has merit. 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 example - XD has 1 warning sign we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.