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 shareholders might well want to know whether insiders have been buying or selling shares in Australian United Investment Company Limited (ASX:AUI).
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Australian United Investment
In the last twelve months, the biggest single purchase by an insider was when Independent Non Executive Director Frederick Grimwade bought AU$76k worth of shares at a price of AU$7.63 per share. That means that an insider was happy to buy shares at around the current price of AU$8.85. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. The good news for Australian United Investment share holders is that an insider was buying at near the current price. Frederick Grimwade was the only individual insider to buy shares in the last twelve months.
You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Australian United Investment is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Australian United Investment 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. Australian United Investment insiders own about AU$37m worth of shares. That equates to 3.4% 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.
What Might The Insider Transactions At Australian United Investment Tell Us?
The fact that there have been no Australian United Investment insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think Australian United Investment insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 2 warning signs for Australian United Investment you should be aware of, and 1 of them makes us a bit uncomfortable.
Of course Australian United Investment may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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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