It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Good Drinks Australia Ltd (ASX:GDA), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Good Drinks Australia Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director Robert Gould for AU$200k worth of shares, at about AU$0.05 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.10), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
In the last twelve months Good Drinks Australia insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Good Drinks Australia is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Good Drinks Australia Boast High 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. Insiders own 20% of Good Drinks Australia shares, worth about AU$25m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Good Drinks Australia Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Good Drinks Australia and their transactions don't cause us concern. 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. When we did our research, we found 4 warning signs for Good Drinks Australia (1 doesn't sit too well with us!) that we believe deserve your full attention.
Of course Good Drinks Australia 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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