We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell New Hope Corporation Limited (ASX:NHC), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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'.
The Last 12 Months Of Insider Transactions At New Hope
While no particular insider transaction stood out, we can still look at the overall trading.
In the last twelve months insiders purchased 40.00k shares for AU$47k. But they sold 38.09k shares for AU$53k. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of New Hope
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. New Hope insiders own about AU$18m worth of shares. That equates to 1.8% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About New Hope Insiders?
It doesn't really mean much that no insider has traded New Hope shares in the last quarter. Still, the insider transactions at New Hope in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk of the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing New Hope. For example - New Hope has 1 warning sign we think you should be aware of.
But note: New Hope 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, but not derivative transactions.
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