We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Electrocomponents plc (LON:ECM), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 don’t think shareholders should simply follow insider transactions. 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 Electrocomponents
The CEO & Director, Lindsley Ruth, made the biggest insider sale in the last 12 months. That single transaction was for UK£372k worth of shares at a price of UK£7.45 each. We generally don’t like to see insider selling, but the lower the sale price, the more it concerns us. It’s of some comfort that this sale was conducted at a price well above the current share price, which is UK£6.06. So it may not shed much light on insider confidence at current levels. Lindsley Ruth was the only individual insider to sell shares in the last twelve months.
Happily, we note that in the last year insiders paid UK£247k for 46200 shares. But insiders sold 50000 shares worth UK£372k. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
Insiders at Electrocomponents Have Bought Stock Recently
It’s good to see that Electrocomponents insiders have made notable investments in the company’s shares. Specifically, Chairman of the Board Peter Johnson bought UK£49k worth of shares in that time, and we didn’t record any sales whatsoever. This makes one think the business has some good points.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.3% of Electrocomponents shares, worth about UK£7.5m, according to our data. We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Electrocomponents Insiders?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. That said, the purchases were not large. We don’t take much encouragement from the transactions by Electrocomponents insiders. And we’re not picking up on high enough insider ownership to give us any comfort. Of course, the future is what matters most. So if you are interested in Electrocomponents, you should check out this free report on analyst forecasts for the company.
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.
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 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.