Insiders who acquired HK$72m worth of Digital China Holdings Limited's (HKG:861) stock at an average price of HK$4.12 in the past 12 months may be dismayed by the recent 6.2% price decline. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth HK$63m, which is not great.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Digital China Holdings

Digital China Holdings Insider Transactions Over The Last Year

Notably, that recent purchase by Chairman & CEO Wei Guo was not the only time they bought Digital China Holdings shares this year. They previously made an even bigger purchase of HK$7.8m worth of shares at a price of HK$4.35 per share. That means that an insider was happy to buy shares at above the current price of HK$3.62. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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.

While Digital China Holdings insiders bought shares during the last year, they didn't sell. 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!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders at Digital China Holdings Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Digital China Holdings. We can see that Chairman & CEO Wei Guo paid HK$18m for shares in the company. No-one sold. That shows some optimism about the company's future.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Digital China Holdings insiders own 20% of the company, currently worth about HK$1.2b based on the recent share price. 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 Do The Digital China Holdings Insider Transactions Indicate?

It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. When combined with notable insider ownership, these factors suggest Digital China Holdings insiders are well aligned, and quite possibly think the share price is too low. Looks promising! 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 Digital China Holdings you should be aware of.

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. We currently account for open market transactions and private dispositions, but not derivative transactions.

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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.