Have Insiders Been Buying NGE Capital Limited (ASX:NGE) Shares?

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in NGE Capital Limited (ASX:NGE).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for NGE Capital

NGE Capital Insider Transactions Over The Last Year

The Executive Chairman & Chief Investment Officer David Lamm made the biggest insider purchase in the last 12 months. That single transaction was for AU$1.9m worth of shares at a price of AU$0.64 each. That means that an insider was happy to buy shares at above the current price of AU$0.56. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. We note that David Lamm was both the biggest buyer and the biggest seller.

Over the last year, we can see that insiders have bought 3.84m shares worth AU$2.3m. But they sold 2.95m shares for AU$1.9m. In total, NGE Capital insiders bought more than they sold over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

NGE Capital is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

NGE Capital Insiders Bought Stock Recently

Over the last quarter, NGE Capital insiders have spent a meaningful amount on shares. We can see that Executive Chairman & Chief Investment Officer David Lamm paid AU$286k for shares in the company. No-one sold. This is a positive in our book as it implies some confidence.

Insider Ownership of NGE Capital

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. NGE Capital insiders own about AU$6.7m worth of shares. That equates to 32% 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 Do The NGE Capital Insider Transactions Indicate?

It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest NGE Capital insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To that end, you should learn about the 2 warning signs we've spotted with NGE Capital (including 1 which can't be ignored).

But note: NGE Capital may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

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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