It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in REA Group Limited (ASX:REA).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
REA Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Director, Tracey Fellows, for AU$911k worth of shares, at about AU$89.31 per share. So what is clear is that an insider saw fit to sell at around the current price of AU$78.40. We generally don’t like to see insider selling, but the lower the sale price, the more it concerns us. In this case, the big sale took place at around the current price, so it’s not too bad (but it’s still not a positive). The only individual insider seller over the last year was Tracey Fellows. Notably Tracey Fellows was also the biggest buyer, having purchased AU$901 worth of shares.
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!
I will like REA Group better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of REA Group
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that REA Group insiders own 0.5% of the company, worth about AU$47m. 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 Does This Data Suggest About REA Group Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. Our analysis of REA Group insider transactions leaves us cautious. But it’s good to see that insiders own shares in the company. Of course, the future is what matters most. So if you are interested in REA Group, you should check out this free report on analyst forecasts for the company.
Of course REA Group may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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