We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 E-L Financial Corporation Limited (TSE:ELF), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
E-L Financial Insider Transactions Over The Last Year
The Independent Director Mark Taylor made the biggest insider purchase in the last 12 months. That single transaction was for CA$83k worth of shares at a price of CA$555 each. Even though the purchase was made at a significantly lower price than the recent price (CA$785), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
In the last twelve months E-L Financial insiders were buying shares, but not selling. Their average price was about CA$688. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. You can see a visual depiction of insider transactions (by companies and 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!
E-L Financial is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of E-L Financial
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.3% of E-L Financial shares, worth about CA$9.3m, according to our data. But they may have an indirect interest through a corporate structure that we haven't picked up on. Whilst better than nothing, we're not overly impressed by these holdings.
So What Do The E-L Financial Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. The transactions are fine but it'd be more encouraging if E-L Financial insiders bought more shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing E-L Financial. In terms of investment risks, we've identified 1 warning sign with E-L Financial and understanding this should be part of your investment process.
Of course E-L Financial may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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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. 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.
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