Possible Bearish Signals With Netwealth Group Insiders Disposing Stock

In the last year, many Netwealth Group Limited (ASX:NWL) insiders sold a substantial stake in the company which may have sparked shareholders' attention. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

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

Check out our latest analysis for Netwealth Group

The Last 12 Months Of Insider Transactions At Netwealth Group

The Non Executive Director, Michael Heine, made the biggest insider sale in the last 12 months. That single transaction was for AU$32m worth of shares at a price of AU$29.00 each. That means that an insider was selling shares at slightly below the current price (AU$30.38). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 1.0% of Michael Heine's holding.

Over the last year, we can see that insiders have bought 5.15k shares worth AU$113k. But insiders sold 5.37m shares worth AU$132m. In total, Netwealth Group insiders sold more than they bought over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insiders At Netwealth Group Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Netwealth Group. In total, insiders dumped AU$78m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

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. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Netwealth Group insiders own 48% of the company, worth about AU$3.6b. 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?

Insiders sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Netwealth Group is growing earnings. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 1 warning sign for Netwealth Group you should be aware of.

But note: Netwealth Group 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 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.