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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 shareholders might well want to know whether insiders have been buying or selling shares in Thred Limited (ASX:THD).
What Is Insider Buying?
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 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. 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’.
Thred Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Jason Peterson for AU$267k worth of shares, at about AU$0.0051 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.002). It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Over the last year, we can see that insiders have bought 124.5m shares worth AU$448k. While Thred insiders bought shares last year, they didn’t sell. The average buy price was around AU$0.0036. This is nice to see since it implies that insiders might see value around current prices. 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!
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.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 38% of Thred shares, worth about AU$1.4m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Thred Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. On a brighter note, the transactions over the last year are encouraging. Overall we don’t see anything to make us think Thred insiders are doubting the company, and they do own shares. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .
But note: Thred 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.