It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Generation Development Group Limited (ASX:GDG).
What Is Insider Buying?
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.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Generation Development Group
The Non-Executive Chairman Robert Coombe made the biggest insider purchase in the last 12 months. That single transaction was for AU$325k worth of shares at a price of AU$0.65 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.89. 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 insiders purchased 1.02m shares for AU$688k. But they sold 11.49k shares for AU$8.4k. In total, Generation Development Group insiders bought more than they sold over the last year. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insiders at Generation Development Group Have Bought Stock Recently
It's good to see that Generation Development Group insiders have made notable investments in the company's shares. We can see that Non-Executive Director Jonathan Tooth paid AU$79k for shares in the company. No-one sold. This makes one think the business has some good points.
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. Generation Development Group insiders own about AU$48m worth of shares. That equates to 31% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Generation Development Group Insiders?
The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. Insiders likely see value in Generation Development Group shares, given these transactions (along with notable insider ownership of the company). So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. In terms of investment risks, we've identified 4 warning signs with Generation Development Group and understanding these should be part of your investment process.
But note: Generation Development Group 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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