Insiders who bought CN¥6.30m worth of Changsha Broad Homes Industrial Group Co., Ltd. (HKG:2163) stock in the last year have seen some of their losses recouped as the stock gained 194% last week. However, the purchase is proving to be an expensive wager as insiders are yet to get ahead of their losses which currently stand at CN¥3.3m since the time of purchase.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

The Last 12 Months Of Insider Transactions At Changsha Broad Homes Industrial Group

Over the last year, we can see that the biggest insider purchase was by Founder Jian Zhang for HK$2.5m worth of shares, at about HK$2.66 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$1.25). 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. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. The only individual insider to buy over the last year was Jian Zhang.

Jian Zhang purchased 2.37m shares over the year. The average price per share was HK$2.66. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

Changsha Broad Homes Industrial Group is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.

Insider Ownership Of Changsha Broad Homes Industrial Group

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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Changsha Broad Homes Industrial Group insiders own 43% of the company, worth about HK$264m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Changsha Broad Homes Industrial Group Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like Changsha Broad Homes Industrial Group 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. When we did our research, we found 3 warning signs for Changsha Broad Homes Industrial Group (2 are concerning!) that we believe deserve your full attention.

But note: Changsha Broad Homes Industrial Group may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.