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 Electrocomponents plc (LON:ECM).
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
Electrocomponents Insider Transactions Over The Last Year
Independent Non-Executive Director Simon Pryce made the biggest insider purchase in the last 12 months. That single transaction was for UK£61k worth of shares at a price of UK£6.12 each. That means that an insider was happy to buy shares at above the current price of UK£4.56. 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. To us, it’s very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months Electrocomponents insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. 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.
Electrocomponents Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Electrocomponents. Not only was there no selling that we can see, but they collectively bought UK£110k worth of shares. This is a positive in our book as it implies some confidence.
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. Insiders own 0.3% of Electrocomponents shares, worth about UK£5.8m, according to our data. Whilst better than nothing, we’re not overly impressed by these holdings.
What Might The Insider Transactions At Electrocomponents Tell Us?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Electrocomponents insiders are expecting a bright future. 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. In terms of investment risks, we’ve identified 1 warning sign with Electrocomponents and understanding it should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
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.
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