How Much Are Australian Finance Group Limited (ASX:AFG) Insiders Taking Off The Table?

By
Simply Wall St
Published
November 06, 2020
ASX:AFG

It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Australian Finance Group Limited (ASX:AFG).

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 equally, we would consider it foolish to ignore insider transactions altogether. 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'.

View our latest analysis for Australian Finance Group

Australian Finance Group Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Co-Founder & Non-Executive Director, Brett McKeon, for AU$15m worth of shares, at about AU$2.51 per share. That means that an insider was selling shares at around the current price of AU$2.36. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.

Happily, we note that in the last year insiders paid AU$636k for 345.00k shares. But insiders sold 11.00m shares worth AU$28m. In total, Australian Finance Group insiders sold more than they bought over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
ASX:AFG Insider Trading Volume November 6th 2020

I will like Australian Finance Group better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Australian Finance Group insiders own about AU$156m worth of shares (which is 25% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Australian Finance Group Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. While we feel good about high insider ownership of Australian Finance Group, we can't say the same about the selling of shares. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Australian Finance Group. At Simply Wall St, we found 3 warning signs for Australian Finance Group that deserve your attention before buying any shares.

But note: Australian Finance Group may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.

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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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