It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell Pro-Pac Packaging Limited (ASX:PPG), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
Pro-Pac Packaging Insider Transactions Over The Last Year
Non-Executive Independent Chairman Jonathan Ling made the biggest insider purchase in the last 12 months. That single transaction was for AU$200k worth of shares at a price of AU$0.14 each. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.10). 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. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
While Pro-Pac Packaging insiders bought shares last year, they didn’t sell. The chart below shows insider transactions (by 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 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).
Insiders at Pro-Pac Packaging Have Bought Stock Recently
Over the last quarter, Pro-Pac Packaging insiders have spent a meaningful amount on shares. Independent Non-Executive Director Rupert Harrington spent AU$97k on stock, and there wasn’t any selling. That shows some optimism about the company’s future.
Does Pro-Pac Packaging Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that Pro-Pac Packaging insiders own about AU$6.3m worth of shares (which is 7.4% of the company). We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We do generally prefer see higher levels of insider ownership.
What Might The Insider Transactions At Pro-Pac Packaging Tell Us?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Pro-Pac Packaging insiders are expecting a bright future. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
Of course Pro-Pac Packaging 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.
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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