We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Generation Development Group Limited (ASX:GDG), you may well want to know whether insiders have been buying or selling.
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, rules govern insider transactions, and certain disclosures are required.
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
Over the last year, we can see that the biggest insider purchase was by Non-Executive Chairman Robert Coombe for AU$325k worth of shares, at about AU$0.65 per share. So it's clear an insider wanted to buy, at around the current price, which is AU$0.69. 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.
Happily, we note that in the last year insiders paid AU$609k for 932.83k shares. On the other hand they divested 11.49k shares, for AU$8.4k. Overall, Generation Development Group insiders were net buyers during the last year. 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!
Generation Development Group 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.
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. In total, insiders bought AU$585k worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.
Insider Ownership of Generation Development Group
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. Generation Development Group insiders own about AU$37m worth of shares. That equates to 31% of the company. 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 Generation Development Group Insider Transactions Indicate?
It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of Generation Development Group we think they are probably pretty confident of a bright 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. For instance, we've identified 4 warning signs for Generation Development Group (1 is a bit unpleasant) you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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