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 Direct Line Insurance Group plc (LON:DLG), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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.'
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Direct Line Insurance Group Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when CEO & Executive Director Paul Geddes sold UK£1.1m worth of shares at a price of UK£3.73 per share. So what is clear is that an insider saw fit to sell at around the current price of UK£3.56. While their view may have changed since the sale, this is not a particularly positive fact. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
Over the last year we saw more insider selling of Direct Line Insurance Group shares, than buying. The sellers received a price of around UK£3.73, on average. 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 the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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Insider Ownership of Direct Line Insurance Group
For a common shareholder, it is worth checking how many shares are held by company insiders. 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 0.3% of Direct Line Insurance Group shares, worth about UK£15m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Direct Line Insurance Group Tell Us?
It doesn't really mean much that no insider has traded Direct Line Insurance Group shares in the last quarter. Still, the insider transactions at Direct Line Insurance Group in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. Of course, the future is what matters most. So if you are interested in Direct Line Insurance Group, you should check out this freereport on analyst forecasts for the company.
Of course Direct Line Insurance Group may not be the best stock to buy. So you may wish to see this freecollection of high quality companies.
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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.