Despite the fact that China Traditional Chinese Medicine Holdings Co Limited (HKG:570) stock rose 9.4% last week, insiders who sold CNY585 million worth of shares in the past 12 months are likely to be in a better position. Selling at an average price of CNY 5.57, which is higher than the current price, may be the right choice because holding the stock means their investment will be lower now than it was at the time of the sale.
While we don’t think shareholders should simply follow insider transactions, we do think it makes perfect sense to keep an eye on what insiders do.
Chinese Traditional Chinese Medicine has been carrying Insider Treatments for the past year
In the past 12 months, the largest single sale by an insider was when the insider, Xiaochun Wang, sold HK$585 million worth of shares at HK$5.57 per share. While insider selling is negative, for us, it is even more negative if the shares are sold at a lower price. The good news is that this big sale was well above the current price of HK$3.73. So it may not shed much light on insider confidence at current levels. Xiaochun Wang was the only insider selling stocks in the past 12 months.
You can see the internal transactions (by companies and individuals) over the past year as shown in the chart below. By clicking on the chart below, you can see the minute details of each insider transaction!
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I’d like to look at how many shares the insiders own in the company, to help make my point about how well they align with the insiders. High internal ownership often makes company leadership more aware of shareholder interests. The employees of China Traditional Chinese Medicine Holdings own approximately HK$615 million in shares. This equates to 3.3% of the company. While this is a strong but not distinct level of internal ownership, it is enough to indicate some alignment between management and the smaller shareholders.
So what do these data suggest about TCM insiders in China?
The fact that there have been no internal transactions of Chinese traditional Chinese medicine lately certainly does not bother us. It is encouraging that insiders own a lot of shares, but we would like to see more insider buying, since the past year of China Traditional Chinese Medicine Holdings’ insider transactions do not fill us with confidence. If you’re anything like me, you might want to consider whether this company is going to grow or shrink. Fortunately, you can check this out Free A report showing analysts’ expectations for its future.
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For the purposes of this article, insiders are individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and own disposals, but not derivative transactions.
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