We often see insiders buying up shares in companies that perform well over the long term. 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 Michael Hill International Limited (ASX:MHJ).
Do Insider Transactions Matter?
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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
The Last 12 Months Of Insider Transactions At Michael Hill International
Over the last year, we can see that the biggest insider purchase was by Non-Executive Independent Director Robert Fyfe for AU$245k worth of shares, at about AU$0.36 per share. We do like to see buying, but this purchase was made at well below the current price of AU$0.65. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Michael Hill International insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Michael Hill International
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Michael Hill International insiders own about AU$19m worth of shares. That equates to 7.0% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Michael Hill International Insider Transactions Indicate?
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. Insiders do have a stake in Michael Hill International and their transactions don't cause us concern. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 2 warning signs for Michael Hill International you should be aware of.
But note: Michael Hill International 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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