Should You Take Comfort From Insider Transactions At Southern Cross Electrical Engineering Limited (ASX:SXE)?

We often see insiders buying up shares in companies that perform well over the long term. 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 Southern Cross Electrical Engineering Limited (ASX:SXE).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.

See our latest analysis for Southern Cross Electrical Engineering

Southern Cross Electrical Engineering Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Director Karl Paganin bought AU$84k worth of shares at a price of AU$0.42 per share. We do like to see buying, but this purchase was made at well below the current price of AU$0.57. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.

Happily, we note that in the last year insiders paid AU$127k for 300.00k shares. But they sold 100.00k shares for AU$55k. In total, Southern Cross Electrical Engineering insiders bought more than they sold over the last year. 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!

Southern Cross Electrical Engineering is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insiders at Southern Cross Electrical Engineering Have Sold Stock Recently

We have seen a bit of insider selling at Southern Cross Electrical Engineering, over the last three months. Executive Director David Hammond sold just AU$55k worth of shares in that time. It's not great to see insider selling, nor the lack of recent buyers. But the amount sold isn't enough for us to put any weight on it.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Southern Cross Electrical Engineering insiders own about AU$36m worth of shares. That equates to 25% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About Southern Cross Electrical Engineering Insiders?

An insider sold stock recently, but they haven't been buying. On the other hand, the insider transactions over the last year are encouraging. It's good to see insiders are shareholders. So the recent selling doesn't worry us too much. 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 example - Southern Cross Electrical Engineering has 3 warning signs we think you should be aware of.

But note: Southern Cross Electrical Engineering 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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