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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 Xref Limited (ASX:XF1).
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 on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
Xref Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Co-Founder Lee-Martin Seymour for AU$5.9m worth of shares, at about AU$0.60 per share. That is hardly a positive sign, even though it took place above the latest price (AU$0.48). So it may not tell us anything about how insiders feel about the current share price.
Over the last year, we note insiders sold 19.70m shares worth AU$12m. Over the last year we saw more insider selling of Xref shares, than buying. The sellers received a price of around AU$0.60, on average. We are not joyful about insider selling. But the selling was at much higher prices than the current share price (AU$0.48), so it probably doesn’t tell us a lot about the value on offer today. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Xref better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Xref Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Insiders own 40% of Xref shares, worth about AU$32m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Xref Tell Us?
It doesn’t really mean much that no insider has traded Xref shares in the last quarter. Our analysis of Xref insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. Of course, the future is what matters most. So if you are interested in Xref, you should check out this free report on analyst forecasts for the company.
Of course Xref may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.