Possible Bearish Signals With Netwealth Group Insiders Disposing Stock

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, if numerous insiders are selling, shareholders should investigate more.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Netwealth Group

The Last 12 Months Of Insider Transactions At Netwealth Group

Over the last year, we can see that the biggest insider sale was by the Non Executive Director, Michael Heine, for AU$30m worth of shares, at about AU$19.85 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$24.57. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 1.3% of Michael Heine's stake.

Over the last year, we can see that insiders have bought 8.15k shares worth AU$152k. On the other hand they divested 2.59m shares, for AU$54m. In total, Netwealth Group insiders sold more than they bought over the last year. The average sell price was around AU$20.90. It's not too encouraging to see that insiders have sold at below the current price. But we wouldn't put too much weight on the insider selling. 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!

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Insiders At Netwealth Group Have Sold Stock Recently

Over the last three months, we've seen notably more insider selling, than insider buying, at Netwealth Group. In that time, insiders dumped AU$23m worth of shares. On the flip side, insiders spent AU$113k on purchasing shares. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.

Insider Ownership Of Netwealth 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. It's great to see that Netwealth Group insiders own 49% of the company, worth about AU$2.9b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Netwealth Group Insider Transactions Indicate?

Unfortunately, there has been more insider selling of Netwealth Group stock, than buying, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. On the plus side, Netwealth Group makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Netwealth Group. While conducting our analysis, we found that Netwealth Group has 2 warning signs and it would be unwise to ignore these.

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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.