We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in Reliance Worldwide Corporation Limited (ASX:RWC).
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, 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. 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.’
The Last 12 Months Of Insider Transactions At Reliance Worldwide
Over the last year, we can see that the biggest insider sale was by the , Jonathan Munz, for AU$367m worth of shares, at about AU$4.65 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of AU$4.95. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. It is worth noting that this sale was 100% of Jonathan Munz’s holding. Jonathan Munz was the only individual insider to sell over the last year. Notably Jonathan Munz was also the biggest buyer, having purchased AU$112m worth of shares.
Happily, we note that in the last year insiders paid AU$112m for 27.0m shares. But insiders sold 79.0m shares worth AU$367m. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Our data indicates that Reliance Worldwide insiders own about AU$7.6m worth of shares (which is 0.2% of the company). Overall, this level of ownership isn’t that impressive, but it’s certainly better than nothing!
What Might The Insider Transactions At Reliance Worldwide Tell Us?
An insider hasn’t bought Reliance Worldwide stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn’t bring confidence, either. When you combine this with the relatively low insider ownership, we are very cautious about the stock. As the saying goes, only fools rush in. Of course, the future is what matters most. So if you are interested in Reliance Worldwide, you should check out this free report on analyst forecasts for the company.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.