Selling AU$4.4m Of Stock Was Lucrative Decision For LGI Insiders

Despite a 14% gain in LGI Limited's (ASX:LGI) stock price this week, shareholders shouldn't let up. The fact that insiders chose to dispose of AU$4.4m worth of stock in the past 12 months even though prices were relatively low could be indicative of some anticipated weakness.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for LGI

The Last 12 Months Of Insider Transactions At LGI

Over the last year, we can see that the biggest insider sale was by the insider, Vivenne Bloomer, for AU$2.0m worth of shares, at about AU$2.00 per share. That means that an insider was selling shares at slightly below the current price (AU$2.97). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 40% of Vivenne Bloomer's holding.

All up, insiders sold more shares in LGI than they bought, over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like LGI better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Does LGI Boast High 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 25% of LGI shares, worth about AU$65m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About LGI Insiders?

The fact that there have been no LGI insider transactions recently certainly doesn't bother us. Our analysis of LGI insider transactions leaves us cautious. The modest level of insider ownership is, at least, some comfort. While it's good to be aware of 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. Case in point: We've spotted 1 warning sign for LGI you should be aware of.

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 of direct interests only, but not derivative transactions or indirect interests.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.