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 we’ll take a look at whether insiders have been buying or selling shares in Australian Agricultural Company Limited (ASX:AAC).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
Australian Agricultural Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Bryan Glinton bought AU$16m worth of shares at a price of AU$1.19 per share. That means that even when the share price was higher than AU$1.05 (the recent price), an insider wanted to purchase shares. 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 when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Bryan Glinton was the only individual insider to buy shares in the last twelve months.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Insider Ownership of Australian Agricultural
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It’s great to see that Australian Agricultural insiders own 46% of the company, worth about AU$282m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Australian Agricultural Insider Transactions Indicate?
The fact that there have been no Australian Agricultural insider transactions recently certainly doesn’t bother us. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Australian Agricultural insiders feel good about the company’s future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Australian Agricultural.
But note: Australian Agricultural 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, but not derivative transactions.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.