We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Matrix Composites & Engineering Ltd (ASX:MCE).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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’.
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The Last 12 Months Of Insider Transactions At Matrix Composites & Engineering
In the last twelve months, the biggest single purchase by an insider was when Maxwell Begley bought AU$110k worth of shares at a price of AU$0.37 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.31). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Notably Maxwell Begley was also the biggest seller, having sold AU$110k worth of shares.
In the last twelve months insiders purchased 450k shares for AU$167k. But they sold 296k for AU$110k. In the last twelve months there was more buying than selling by Matrix Composites & Engineering insiders. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that Matrix Composites & Engineering insiders own 26% of the company, worth about AU$8.2m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Matrix Composites & Engineering Insider Transactions Indicate?
The fact that there have been no Matrix Composites & Engineering insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Matrix Composites & Engineering and their transactions don’t cause us concern. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.