Stock Analysis

Should You Review Recent Insider Transactions At ASX Limited (ASX:ASX)?

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ASX:ASX
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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 shareholders might well want to know whether insiders have been buying or selling shares in ASX Limited (ASX:ASX).

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, rules govern insider transactions, and certain disclosures are required.

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'.

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ASX Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the MD, CEO & Executive Director, Dominic Stevens, sold AU$751k worth of shares at a price of AU$84.00 per share. So we know that an insider sold shares at around the present share price of AU$74.89. While we don't usually like to see insider selling, it's more concerning if the sales take place 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. The only individual insider seller over the last year was Dominic Stevens.

In the last twelve months insiders purchased 4.00k shares for AU$328k. On the other hand they divested 8.94k shares, for AU$751k. 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!

insider-trading-volume
ASX:ASX Insider Trading Volume December 12th 2020

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Insider Ownership of ASX

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. ASX insiders own about AU$70m worth of shares. That equates to 0.5% 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 Does This Data Suggest About ASX Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. Still, the insider transactions at ASX in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk of the company. 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. In terms of investment risks, we've identified 1 warning sign with ASX and understanding it should be part of your investment process.

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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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