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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Hanmi Financial Corporation (NASDAQ:HAFC), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
Hanmi Financial Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the , Joseph Rho, sold US$1.4m worth of shares at a price of US$22.41 per share. So we know that an insider sold shares at around the present share price of US$21.60. While we don't usually like to see insider selling, it's more concerning if the sales take price at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern. Joseph Rho was the only individual insider to sell over the last year.
Over the last year, we can see that insiders have bought 15000 shares worth US$375k. On the other hand they divested 150k shares, for US$3.4m. Joseph Rho divested 150k shares over the last 12 months at an average price of US$22.48. You can see the insider transactions (by 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!
I will like Hanmi Financial better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Hanmi Financial
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It appears that Hanmi Financial insiders own 1.7% of the company, worth about US$12m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Hanmi Financial Tell Us?
An insider sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Hanmi Financial makes money, and is growing profits. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd think twice before buying! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Hanmi Financial.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.