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 before you buy or sell Diversified United Investment Limited (ASX:DUI), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Diversified United Investment Insider Transactions Over The Last Year
The Non-Executive Director Anthony Burgess made the biggest insider purchase in the last 12 months. That single transaction was for AU$1.5m worth of shares at a price of AU$4.20 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$4.80. 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.
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!
Diversified United Investment is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Diversified United Investment insiders own about AU$52m worth of shares. That equates to 5.1% 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 Diversified United Investment Tell Us?
The fact that there have been no Diversified United Investment insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Diversified United Investment and we see no evidence to suggest they are worried about the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Diversified United Investment.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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