Read This Before Selling Altium Limited (ASX:ALU) Shares

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 shareholders might well want to know whether insiders have been buying or selling shares in Altium Limited (ASX:ALU).

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.

Insider transactions are not the most important thing when it comes to long-term investing. 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'.

View our latest analysis for Altium

Altium Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Raelene Murphy bought AU$80k worth of shares at a price of AU$32.04 per share. That means that an insider was happy to buy shares at around the current price of AU$34.68. Of course they may have changed their mind. But this suggests they are optimistic. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the Altium insiders decided to buy shares at close to current prices.

In the last twelve months insiders purchased 4.50k shares for AU$130k. But insiders sold 1.00k shares worth AU$24k. Overall, Altium insiders were net buyers during the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

Altium is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Altium insiders own about AU$551m worth of shares (which is 12% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Altium Tell Us?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, Altium insiders feel good about the company's future. 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. While conducting our analysis, we found that Altium has 1 warning sign and it would be unwise to ignore this.

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. 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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