It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Glencore plc (LON:GLEN), 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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
Glencore Insider Transactions Over The Last Year
The Non-Executive Director Peter Coates made the biggest insider purchase in the last 12 months. That single transaction was for UK£102k worth of shares at a price of UK£1.27 each. Even though the purchase was made at a significantly lower price than the recent price (UK£2.69), 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.
Glencore insiders may have bought shares in the last year, but they didn't sell any. The average buy price was around UK£1.46. We don't deny that it is nice to see insiders buying stock in the company. However, we do note that they were buying at significantly lower prices than today's 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!
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.
Does Glencore Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Glencore insiders own 16% of the company, currently worth about UK£5.9b 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.
What Might The Insider Transactions At Glencore Tell Us?
The fact that there have been no Glencore insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, Glencore insiders feel good about the company's future. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Be aware that Glencore is showing 2 warning signs in our investment analysis, and 1 of those is significant...
Of course Glencore 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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