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 Telstra Corporation Limited (ASX:TLS), 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Telstra Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Non-Executive Director Niek van Damme for AU$124k worth of shares, at about AU$2.95 per share. That implies that an insider found the current price of AU$3.05 per share to be enticing. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider purchases were made at close to current prices.
Telstra insiders may have bought shares in the last year, but they didn't sell any. Their average price was about AU$3.49. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insiders at Telstra Have Bought Stock Recently
Over the last quarter, Telstra insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought AU$174k worth of shares. This makes one think the business has some good points.
Insider Ownership of Telstra
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. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.05% of Telstra shares, worth about AU$16m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Telstra Tell Us?
It's certainly positive to see the recent insider purchases. We also take confidence from the longer term picture of insider transactions. When combined with notable insider ownership, these factors suggest Telstra insiders are well aligned, and that they may think the share price is too low. 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. To that end, you should learn about the 6 warning signs we've spotted with Telstra (including 1 which doesn't sit too well with us).
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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