We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Reverse Corp Limited (ASX:REF), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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.’
The Last 12 Months Of Insider Transactions At Reverse
James Manning made the biggest insider purchase in the last 12 months. That single transaction was for AU$102k worth of shares at a price of AU$0.063 each. That means that even when the share price was higher, an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. That purchase may suggest an expectation of positive returns over the long term. James Manning was the only buyer over the year.
James Manning divested 2.74m shares over the last 12 months at an average price of AU$0.064. You can see the insider transactions over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Reverse 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 Reverse 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. We usually like to see fairly high levels of insider ownership. Reverse insiders own 46% of the company, currently worth about AU$983k based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Reverse Insiders?
The fact that there have been no Reverse insider transactions recently certainly doesn’t bother us. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, Reverse insiders feel good about the company’s future. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
Of course Reverse 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 email@example.com.