We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in Associated British Foods plc (LON:ABF).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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.
Associated British Foods Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Director Graham Allan bought UK£68k worth of shares at a price of UK£22.50 per share. That means that an insider was happy to buy shares at around the current price of UK£23.18. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it’s less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. The good news for Associated British Foods share holders is that insiders were buying at near the current price.
Associated British Foods insiders may have bought shares in the last year, but they didn’t sell any. You can see the insider transactions (by individuals) over the last year depicted in the chart below. 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).
Associated British Foods Insiders Bought Stock Recently
Over the last quarter, Associated British Foods insiders have spent a meaningful amount on shares. Senior Independent Director Linda Cairnie spent UK£50k on stock, and there wasn’t any selling. That shows some optimism about the company’s future.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. It’s great to see that Associated British Foods insiders own 0.6% of the company, worth about UK£105m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Associated British Foods Tell Us?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. The net investment is not enough to encourage us much. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Associated British Foods insiders are reasonably well aligned (owning significant chunk of the company’s shares) and optimistic for the future. Of course, the future is what matters most. So if you are interested in Associated British Foods, you should check out this free report on analyst forecasts for the company.
Of course Associated British Foods may not be the best stock to buy. So you may wish to see this free collection of high quality 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, but not derivative transactions.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.