We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in InvestSMART Group Limited (ASX:INV).
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
InvestSMART Group Insider Transactions Over The Last Year
The MD, CEO & Executive Director Peter Hodge made the biggest insider purchase in the last 12 months. That single transaction was for AU$272k worth of shares at a price of AU$0.085 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.21), we still think insider buying is a positive. 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.
Peter Hodge purchased 5.50m shares over the year. The average price per share was AU$0.11. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
InvestSMART Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of InvestSMART Group
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. It appears that InvestSMART Group insiders own 35% of the company, worth about AU$11m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The InvestSMART Group Insider Transactions Indicate?
The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss during the last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest InvestSMART Group insiders are well aligned, and that they may think the share price is too low. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing InvestSMART Group. Every company has risks, and we've spotted 3 warning signs for InvestSMART Group you should know about.
Of course InvestSMART Group 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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