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 Netwealth Group Limited (ASX:NWL).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
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 Netwealth Group
In the last twelve months, the biggest single sale by an insider was when the Joint MD & Director, Michael Heine, sold AU$76m worth of shares at a price of AU$13.90 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$16.41. 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. It is worth noting that this sale was only 3.9% of Michael Heine's holding.
In the last year Netwealth Group insiders didn't buy any company stock. 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!
I will like Netwealth Group better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Many investors like to check how much of a company is owned by 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 68% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Netwealth Group Tell Us?
It doesn't really mean much that no insider has traded Netwealth Group shares in the last quarter. While we feel good about high insider ownership of Netwealth Group, we can't say the same about the selling of shares. Of course, the future is what matters most. So if you are interested in Netwealth Group, you should check out this free report on analyst forecasts for the company.
Of course Netwealth Group may not be the best stock to buy. So you may wish to see this free collection of high quality 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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