Digital Domain Holdings Limited (HKG:547) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 19%, resulting in a HK$519m rise in the company's market capitalisation, translating to a gain of 55% on their initial investment. Put another way, the original HK$794.4m acquisition is now worth HK$1.23b.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

Digital Domain Holdings Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when insider Xiaohu Wang bought HK$244m worth of shares at a price of HK$0.46 per share. That means that even when the share price was higher than HK$0.41 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

Happily, we note that in the last year insiders paid HK$794m for 2.97b shares. But they sold 1.31b shares for HK$339m. Overall, Digital Domain Holdings insiders were net buyers during the last year. The average buy price was around HK$0.27. To my mind it is good that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. 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. 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 Digital Domain Holdings Have Bought Stock Recently

At Digital Domain Holdings,over the last quarter, we have observed quite a lot more insider buying than insider selling. Insiders spent HK$421m on shares. But insiders only sold shares worth HK$238m. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.

Insider Ownership Of Digital Domain Holdings

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Digital Domain Holdings insiders own about HK$1.7b worth of shares (which is 52% 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.

What Might The Insider Transactions At Digital Domain Holdings Tell Us?

It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Digital Domain Holdings insiders are well aligned, and quite possibly think the share price is too low. That's what I like to see! While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Our analysis shows 3 warning signs for Digital Domain Holdings (1 shouldn't be ignored!) and we strongly recommend you look at them before investing.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.