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 STEMify Limited (ASX:SF1).
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, rules govern insider transactions, and certain disclosures are required.
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.
STEMify Insider Transactions Over The Last Year
insider Anthony De Nicola made the biggest insider purchase in the last 12 months. That single transaction was for AU$199k worth of shares at a price of AU$0.025 each. So it’s clear an insider wanted to buy, at around the current price, which is AU$0.026. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it’s a good sign on balance, but keep in mind they may no longer see value. Happily, the STEMify insider decided to buy shares at close to current prices. The only individual insider to buy over the last year was Anthony De Nicola.
The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
STEMify is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Does STEMify Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. STEMify insiders own about AU$745k worth of shares. That equates to 19% of the company. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About STEMify Insiders?
It’s certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But we don’t feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest STEMify insiders are well aligned, and that they may think the share price is too low. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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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