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 before you buy or sell Goodman Group (ASX:GMG), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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 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'.
The Last 12 Months Of Insider Transactions At Goodman Group
In the last twelve months, the biggest single sale by an insider was when the Group CEO & Director, Gregory Goodman, sold AU$19m worth of shares at a price of AU$18.54 per share. That means that even when the share price was below the current price of AU$22.53, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 47% of Gregory Goodman's holding.
Over the last year, we can see that insiders have bought 33.56k shares worth AU$615k. On the other hand they divested 3.51m shares, for AU$65m. Over the last year we saw more insider selling of Goodman Group shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Goodman Group Have Sold Stock Recently
The last three months saw significant insider selling at Goodman Group. In total, insiders dumped AU$12m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Goodman Group
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Goodman Group insiders own 2.3% of the company, currently worth about AU$976m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Goodman Group Insiders?
Insiders haven't bought Goodman Group stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. But since Goodman Group is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Every company has risks, and we've spotted 2 warning signs for Goodman Group (of which 1 is significant!) you should know about.
But note: Goodman Group 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.
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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