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 Newcrest Mining Limited (ASX:NCM).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
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The Last 12 Months Of Insider Transactions At Newcrest Mining
In the last twelve months, the biggest single sale by an insider was when MD, CEO & Director Sandeep Biswas sold AU$2.6m worth of shares at a price of AU$21.45 per share. That means that even when the share price was below the current price of AU$23.50, an insider wanted to cash in some shares. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. We note that the biggest single sale was only 15.8% of Sandeep Biswas’s holding.
We note that in the last year insiders divested 197.30k shares for a total of AU$4.2m. Over the last year we saw more insider selling of Newcrest Mining shares, than buying. They sold for an average price of about US$21.39. It’s not ideal to see that insiders have sold at around the current price. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
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Insiders at Newcrest Mining Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at Newcrest Mining. In total, insiders dumped US$4.2m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Insider Ownership of Newcrest Mining
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Newcrest Mining insiders own 0.2% of the company, worth about AU$33m. 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 Do The Newcrest Mining Insider Transactions Indicate?
Insiders haven’t bought Newcrest Mining stock in the last three months, but there was some selling. Looking to the last twelve months, our data doesn’t show any insider buying. While insiders do own shares, they don’t own a heap, and they have been selling. So we’d only buy after careful consideration. Of course, the future is what matters most. So if you are interested in Newcrest Mining, you should check out this free report on analyst forecasts for the company.
But note: Newcrest Mining 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.