We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Victoria plc (LON:VCP), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Victoria
The Group Finance Director & Executive Director, Michael Scott, made the biggest insider sale in the last 12 months. That single transaction was for UK£1.1m worth of shares at a price of UK£6.05 each. So it's clear an insider wanted to take some cash off the table, even below the current price of UK£10.00. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 42% of Michael Scott's holding. The only individual insider seller over the last year was Michael Scott.
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 Victoria better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Victoria
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. Victoria insiders own 20% of the company, currently worth about UK£231m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Victoria Tell Us?
It doesn't really mean much that no insider has traded Victoria shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Victoria insiders selling. Therefore, you should definitely take a look at this FREE report showing analyst forecasts for Victoria.
Of course Victoria 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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