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 Diversified Royalty Corp. (TSE:DIV), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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.’
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The Last 12 Months Of Insider Transactions At Diversified Royalty
The Chairman of the Board, Lawrence Haber, made the biggest insider sale in the last 12 months. That single transaction was for CA$321k worth of shares at a price of CA$3.23 each. That means that an insider was selling shares at around the current price of CA$3.21. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn’t a major concern, though it’s hardly a good sign. The only individual insider seller over the last year was Lawrence Haber.
Happily, we note that in the last year insiders paid CA$776k for 246k shares. On the other hand they divested 155k shares, for CA$501k. Overall, Diversified Royalty insiders were net buyers last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. 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.
Insider Ownership
Many investors like to check how much of a company is owned by insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Insiders own 2.1% of Diversified Royalty shares, worth about CA$7.4m, according to our data. We do generally prefer see higher levels of insider ownership.
So What Do The Diversified Royalty Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded Diversified Royalty shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. While we have no worries about the insider transactions, we’d be more comfortable if they owned more Diversified Royalty stock. Of course, the future is what matters most. So if you are interested in Diversified Royalty, you should check out this free report on analyst forecasts for the company.
But note: Diversified Royalty may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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.