Yahoo Finance Have Insiders Sold China Resources Power Holdings Company Limited (HKG:836) Shares Recently?
China Resources Power Holdings Company Limited, an investment holding company, invests in, develops, operates, and manages power plants and coal mines in the People’s Republic of China. China Resources Power Holdings is one of Hong Kong’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 498.76k shares during this period. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. A research published in The MIT Press (1998) concluded that stocks following insider selling fell 2.7% compared to the market. But these signals may not be sufficient to gain confidence on whether to divest. I will be analysing whether these selling activities are supported by favourable future outlook and recent share price volatility.
See our latest analysis for China Resources Power Holdings
Who Are The Insiders?
There were more China Resources Power Holdings insiders that have sold shares than those that have bought. In total, individual insiders own over 4.39 million shares in the business, which makes up around 0.091% of total shares outstanding.
. The entity that sold on the open market in the last three months was J.P. Morgan Asset Management Inc.. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is This Consistent With Future Growth?
Analysts’ expectations for earnings over the next 3 years of 63.0% provides a great outlook going forward. But this is not consistent with the signal company insiders are sending with their net selling activity.
Delving deeper into the line items, China Resources Power Holdings is believed to experience a restrained level of top-line growth over the next year, although a significantly greater rate of earnings growth. Generally, this difference can be explained by a large drop in cost growth.
This may not be seen as a maintainable practice by insiders, who may expect a deterioration in earnings to reflect lower revenues growth in the future. Or they may merely view the stock as overvalued by the market which provides a suitable time to sell.
Did Stock Price Volatility Instigate Selling?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook.
China Resources Power Holdings’s shares ranged between HK$16.2 and HK$13.3 over the past three months. This suggests moderate volatility with a share price movement of 21.8%.
This may not be large enough to warrant any significant divesting, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio diversification needs.
Next Steps:
China Resources Power Holdings’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, although the positive expected earnings growth challenges this assumption, and the relatively stable stock price may not warrant exploiting any mispricing. But we must also be aware that insiders divesting may not actually be based their views on the company’s outlook. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two relevant aspects you should look at:
Financial Health: Does China Resources Power Holdings have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of China Resources Power Holdings? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
