We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Nanosonics Limited (ASX:NAN).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
The Last 12 Months Of Insider Transactions At Nanosonics
Over the last year, we can see that the biggest insider purchase was by Non-Executive Deputy Chairman of the Board & Lead Independent Director Steven Sargent for AU$100k worth of shares, at about AU$6.07 per share. That means that an insider was happy to buy shares at above the current price of AU$5.12. 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. 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.
While Nanosonics insiders bought shares during the last year, they didn't sell. 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!
Nanosonics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Nanosonics insiders own about AU$261m worth of shares (which is 16% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Nanosonics Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Nanosonics shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Nanosonics insiders feel good about the company's future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. You'd be interested to know, that we found 1 warning sign for Nanosonics and we suggest you have a look.
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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