SomnoMed Limited (ASX:SOM) Insiders Increased Their Holdings

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 before you buy or sell SomnoMed Limited (ASX:SOM), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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'.

View our latest analysis for SomnoMed

The Last 12 Months Of Insider Transactions At SomnoMed

Over the last year, we can see that the biggest insider purchase was by Non-Executive Chairman Peter Neustadt for AU$204k worth of shares, at about AU$0.80 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$1.25. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

SomnoMed is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 7.2% of SomnoMed shares, worth about AU$7.5m, according to our data. But they may have an indirect interest through a corporate structure that we haven't picked up on. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

What Might The Insider Transactions At SomnoMed Tell Us?

There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. We'd like to see bigger individual holdings. However, we don't see anything to make us think SomnoMed insiders are doubting the company. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For instance, we've identified 5 warning signs for SomnoMed (1 is potentially serious) you should be aware of.

Of course SomnoMed 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.

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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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