Shareholders might want to keep a close eye on JB Hi-Fi Limited (ASX:JBH) after insiders sold AU$2.8m stock earlier this year

Despite a 3.6% gain in JB Hi-Fi Limited's (ASX:JBH) stock price this week, shareholders shouldn't let up. Although prices were relatively low, insiders chose to sell AU$2.8m worth of stock in the past 12 months. This could be a sign of impending weakness.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for JB Hi-Fi

JB Hi-Fi Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Group CEO & Executive Director, Terry Smart, for AU$1.5m worth of shares, at about AU$41.67 per share. That means that even when the share price was below the current price of AU$45.55, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 21% of Terry Smart's holding.

In the last twelve months insiders purchased 3.00k shares for AU$132k. But they sold 67.55k shares for AU$2.8m. In total, JB Hi-Fi insiders sold more than they bought over the last year. You can see a visual depiction of insider transactions (by companies and 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!

I will like JB Hi-Fi 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

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. From our data, it seems that JB Hi-Fi insiders own 0.2% of the company, worth about AU$9.1m. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

So What Do The JB Hi-Fi Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. Our analysis of JB Hi-Fi insider transactions leaves us unenthusiastic. And usually insiders own more stock in the company, according to our data. 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. When we did our research, we found 3 warning signs for JB Hi-Fi (2 are a bit unpleasant!) that we believe deserve your full attention.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.