Usually, when one insider buys stock, it might not be a monumental event. But when multiple insiders are buying like they did in the case of City Developments Limited (SGX:C09), that sends out a positive message to the company's shareholders.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

City Developments Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Non-Executive & Independent Director Lian Jin Ong bought S$580k worth of shares at a price of S$5.80 per share. That means that an insider was happy to buy shares at above the current price of S$5.42. 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. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

While City Developments insiders bought shares during the last year, they didn't sell. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At City Developments Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at City Developments. Not only was there no selling that we can see, but they collectively bought S$805k worth of shares. This could be interpreted as suggesting a positive outlook.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data suggests City Developments insiders own 0.06% of the company, worth about S$2.9m. However, it's possible that insiders might have an indirect interest through a more complex structure. We prefer to see high levels of insider ownership.

So What Do The City Developments Insider Transactions Indicate?

It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that City Developments insiders are expecting a bright future. 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. Case in point: We've spotted 3 warning signs for City Developments you should be aware of, and 1 of these is a bit concerning.

Of course City Developments may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com