We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Lovisa Holdings Limited (ASX:LOV), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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 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'.
Lovisa Holdings Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the MD & Executive Director, Shane Fallscheer, for AU$15m worth of shares, at about AU$11.21 per share. So what is clear is that an insider saw fit to sell at around the current price of AU$10.88. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. 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). Shane Fallscheer was the only individual insider to sell shares in the last twelve months.
Shane Fallscheer sold a total of 1.69m shares over the year at an average price of AU$11.09. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
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 Lovisa Holdings Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Lovisa Holdings. In total, MD & Executive Director Shane Fallscheer dumped AU$19m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Lovisa Holdings Boast High 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Lovisa Holdings insiders own about AU$520m worth of shares (which is 46% of the company). 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 Do The Lovisa Holdings Insider Transactions Indicate?
An insider hasn't bought Lovisa Holdings stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. It is good to see high insider ownership, but the insider selling leaves us cautious. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Lovisa Holdings. You'd be interested to know, that we found 4 warning signs for Lovisa Holdings and we suggest you have a look.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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. 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.
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