It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Macquarie Group Limited (ASX:MQG).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Macquarie Group
The Independent Non Executive Director Glenn Stevens made the biggest insider purchase in the last 12 months. That single transaction was for AU$102k worth of shares at a price of AU$128 each. Even though the purchase was made at a significantly lower price than the recent price (AU$155), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
In the last twelve months Macquarie Group insiders were buying shares, but not selling. They paid about AU$69.26 on average. We don't deny that it is nice to see insiders buying stock in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Have Macquarie Group Insiders Traded Recently?
We've only seen a tiny insider purchase valued at AU$158, in the last three months. Looking at the net result, we don't think these recent trades shed much light on how insiders, as a group, are feeling about the company's prospects.
Insider Ownership of Macquarie Group
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. Macquarie Group insiders own about AU$546m worth of shares (which is 1.0% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Macquarie Group Tell Us?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. The net investment is not enough to encourage us much. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Macquarie Group insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Macquarie Group. Case in point: We've spotted 2 warning signs for Macquarie Group you should be aware of, and 1 of these can't be ignored.
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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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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