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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 we’ll take a look at whether insiders have been buying or selling shares in LatAm Autos Limited (ASX:LAA).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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’.
LatAm Autos Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Simon Clausen for AU$135k worth of shares, at about AU$0.14 per share. That means that an insider was happy to buy shares at around the current price. That means they have been optimistic about the company in the past, though they may have changed their mind. We generally consider it a positive if insiders have been buying on market, even if the share price has increased a bit since then.
In the last twelve months insiders paid AU$319k for 2.28m shares purchased. In the last twelve months there was more buying than selling by LatAm Autos insiders. Their average price was about AU$0.14. Although they bought at below the recent price of AU$0.14 per share, it is good to see that insiders are willing to invest in the company. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that LatAm Autos insiders own 17% of the company, worth about AU$9.9m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At LatAm Autos Tell Us?
The fact that there have been no LatAm Autos insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in LatAm Autos and we see no evidence to suggest they are worried about the future. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: LatAm Autos 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.