Need To Know: Genworth Mortgage Insurance Australia Limited (ASX:GMA) Insiders Have Been Buying Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Genworth Mortgage Insurance Australia Limited (ASX:GMA).

Do Insider Transactions Matter?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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'.

View our latest analysis for Genworth Mortgage Insurance Australia

The Last 12 Months Of Insider Transactions At Genworth Mortgage Insurance Australia

In the last twelve months, the biggest single purchase by an insider was when Independent Non Executive Director Duncan West bought AU$174k worth of shares at a price of AU$3.00 per share. That means that even when the share price was higher than AU$2.50 (the recent price), an insider wanted to purchase shares. 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. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

While Genworth Mortgage Insurance Australia insiders bought shares during the last year, they didn't sell. The average buy price was around AU$2.27. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. 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!

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

Does Genworth Mortgage Insurance Australia 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Based on our data, Genworth Mortgage Insurance Australia insiders have about 0.3% of the stock, worth approximately AU$3.4m. We consider this fairly low insider ownership.

What Might The Insider Transactions At Genworth Mortgage Insurance Australia Tell Us?

The fact that there have been no Genworth Mortgage Insurance Australia insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Genworth Mortgage Insurance Australia stock. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. You'd be interested to know, that we found 1 warning sign for Genworth Mortgage Insurance Australia and we suggest you have a look.

But note: Genworth Mortgage Insurance Australia 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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