Should You Take Comfort From Insider Transactions At Select Harvests Limited (ASX:SHV)?

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 shareholders might well want to know whether insiders have been buying or selling shares in Select Harvests Limited (ASX:SHV).

What Is Insider Selling?

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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.

See our latest analysis for Select Harvests

The Last 12 Months Of Insider Transactions At Select Harvests

The Independent Chairman of the Board Michael Iwaniw made the biggest insider purchase in the last 12 months. That single transaction was for AU$74k worth of shares at a price of AU$5.02 each. So it's clear an insider wanted to buy, at around the current price, which is AU$5.35. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. In this case we're pleased to report that the insider purchases were made at close to current prices.

In the last twelve months Select Harvests insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

Select Harvests is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insiders at Select Harvests Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Select Harvests. Overall, seven insiders shelled out AU$242k for shares in the company -- and none sold. That shows some optimism about the company's future.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data suggests Select Harvests insiders own 0.8% of the company, worth about AU$4.8m. I generally like to see higher levels of ownership.

So What Do The Select Harvests Insider Transactions Indicate?

The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Select Harvests stock. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Select Harvests has 4 warning signs and it would be unwise to ignore these.

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.

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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