We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we’ll take a look at whether insiders have been buying or selling shares in Telstra Corporation Limited (ASX:TLS).
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, such insiders must disclose their trading activities, and not trade on inside information.
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.’
View our latest analysis for Telstra
The Last 12 Months Of Insider Transactions At Telstra
In the last twelve months, the biggest single sale by an insider was when the CEO, MD & Director, Andrew Penn, sold AU$972k worth of shares at a price of AU$3.24 per share. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of AU$3.29. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. We note that the biggest single sale was only 17.8% of Andrew Penn’s holding. The only individual insider seller over the last year was Andrew Penn.
In the last twelve months insiders purchased 126k shares for AU$407k. But insiders sold 300k shares worth AU$972k. You can see the insider transactions (by individuals) 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 Telstra better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Telstra Have Sold Stock Recently
There was substantially more insider selling, than buying, of Telstra shares over the last three months. In total, Andrew Penn sold AU$972k worth of shares in that time. On the other hand we note insiders bought AU$407k worth of shares, as previously mentioned. Since the selling really does outweigh the buying, we’d say that these transactions may suggest that some insiders feel the shares are not cheap.
Insider Ownership
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Telstra insiders own about AU$16m worth of shares. That equates to 0.04% 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 Does This Data Suggest About Telstra Insiders?
The insider sales have outweighed the insider buying, at Telstra, in the last three months. And our longer term analysis of insider transactions didn’t bring confidence, either. Insiders own shares, but we’re still pretty cautious, given the history of sales. So we’d only buy after careful consideration. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Telstra.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.