Should You Review Recent Insider Transactions At Broo Limited (ASX:BEE)?

We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Broo Limited (ASX:BEE).

What Is Insider Buying?

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, such insiders must disclose their trading activities, and not trade on inside information.

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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

View our latest analysis for Broo

The Last 12 Months Of Insider Transactions At Broo

Over the last year, we can see that the biggest insider sale was by the Executive Chairman, Kent Grogan, for AU$980k worth of shares, at about AU$0.016 per share. That means that an insider was selling shares at around the current price of AU$0.016. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern. Kent Grogan was the only individual insider to sell shares in the last twelve months.

Kent Grogan ditched 101.25m shares over the year. The average price per share was AU$0.014. The chart below shows insider transactions (by companies and 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!

I will like Broo better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insider Ownership

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's great to see that Broo insiders own 45% of the company, worth about AU$6.8m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At Broo Tell Us?

The fact that there have been no Broo insider transactions recently certainly doesn't bother us. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Broo insiders selling. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For example, Broo has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

But note: Broo 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.

When trading Broo or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.