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 we'll take a look at whether insiders have been buying or selling shares in NRW Holdings Limited (ASX:NWH).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At NRW Holdings
In the last twelve months, the biggest single sale by an insider was when the CEO, MD & Executive Director, Julian Pemberton, sold AU$5.0m worth of shares at a price of AU$1.36 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$2.11. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 28% of Julian Pemberton's stake. The only individual insider seller over the last year was Julian Pemberton.
The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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Many investors like to check how much of a company is owned by 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. NRW Holdings insiders own about AU$64m worth of shares. That equates to 6.4% 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 Do The NRW Holdings Insider Transactions Indicate?
It doesn't really mean much that no insider has traded NRW Holdings shares in the last quarter. Still, the insider transactions at NRW Holdings in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk of the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example - NRW Holdings has 3 warning signs we think you should be aware of.
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.
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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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