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 we’ll take a look at whether insiders have been buying or selling shares in Biffa plc (LON:BIFF).
What Is Insider Buying?
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 equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
Biffa Insider Transactions Over The Last Year
Managing Director of Municipal Division Roger Edwards made the biggest insider sale in the last 12 months. That single transaction was for UK£865k worth of shares at a price of UK£2.47 each. So what is clear is that an insider saw fit to sell at around the current price of UK£1.96. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We generally tread carefully if insiders have been selling on market, even if they sold slightly above the current price.
Over the last year, we can see that insiders have bought 70.00k shares worth UK£143k. On the other hand they divested 855.00k shares, for UK£2.1m. All up, insiders sold more shares in Biffa than they bought, over the last year. They sold for an average price of about UK£2.51. We don’t gain much confidence from insider selling near the recent share price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. You can see a visual depiction of insider transactions 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Biffa Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Biffa shares. In total, insiders sold UK£200k worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
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. Biffa insiders own 1.6% of the company, currently worth about UK£7.6m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Biffa Insider Transactions Indicate?
Insiders sold Biffa shares recently, but they didn’t buy any. And our longer term analysis of insider transactions didn’t bring confidence, either. But it is good to see that Biffa is growing earnings. When you combine this with the relatively low insider ownership, we are very cautious about the stock. As the saying goes, only fools rush in. Of course, the future is what matters most. So if you are interested in Biffa, you should check out this free report on analyst forecasts for the company.
But note: Biffa 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.