Netwealth Group Insiders Sell AU$122m Of Stock, Possibly Signalling Caution

The fact that multiple Netwealth Group Limited (ASX:NWL) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Netwealth Group

Netwealth Group Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Executive Director, Michael Heine, sold AU$50m worth of shares at a price of AU$15.30 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$21.32. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just 2.7% of Michael Heine's stake.

Over the last year we saw more insider selling of Netwealth Group shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like Netwealth Group better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Insiders At Netwealth Group Have Sold Stock Recently

The last quarter saw substantial insider selling of Netwealth Group shares. In total, insiders sold AU$31m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Does Netwealth Group Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Netwealth Group insiders own about AU$2.6b worth of shares (which is 49% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Netwealth Group Insider Transactions Indicate?

Insiders sold Netwealth Group shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. But since Netwealth Group is profitable and growing, we're not too worried by this. It is good to see high insider ownership, but the insider selling leaves us cautious. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. While conducting our analysis, we found that Netwealth Group has 1 warning sign and it would be unwise to ignore it.

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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.