We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Smith & Nephew plc (LON:SN.).
What Is Insider Selling?
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 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’.
The Last 12 Months Of Insider Transactions At Smith & Nephew
In the last twelve months, the biggest single purchase by an insider was when Chief Executive Officer Roland Diggelmann bought UK£85k worth of shares at a price of UK£14.24 per share. So it’s clear an insider wanted to buy, at around the current price, which is UK£15.86. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. 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. Happily, the Smith & Nephew insiders decided to buy shares at close to current prices.
Happily, we note that in the last year insiders paid UK£246k for 15.50k shares. But they sold 9.15k shares for UK£162k. In the last twelve months there was more buying than selling by Smith & Nephew insiders. The average buy price was around UK£15.87. This is nice to see since it implies that insiders might see value around current prices. 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 plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Are Smith & Nephew Insiders Buying Or Selling?
We saw some Smith & Nephew insider buying shares in the last three months. In that period Chief Executive Officer Roland Diggelmann spent UK£83k on shares. However, Chief Business Development & Corporate Affairs Officer Philip Cowdy netted UK£77k for sales. While it’s good to see the insider buying, the net amount bought isn’t enough for us to gain much confidence from it.
Insider Ownership of Smith & Nephew
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Smith & Nephew insiders own 0.07% of the company, worth about UK£9.9m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Smith & Nephew Insiders?
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. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we’d be more comfortable if they owned more Smith & Nephew stock. 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 Smith & Nephew 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. 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.
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