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 we'll take a look at whether insiders have been buying or selling shares in Mondi plc (LON:MNDI).
What Is Insider Buying?
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Mondi Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the insider, Peter Oswald, sold UK£568k worth of shares at a price of UK£16.41 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of UK£17.58. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 14% of Peter Oswald's holding. Peter Oswald was the only individual insider to sell shares in the last twelve months.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data suggests Mondi insiders own 0.02% of the company, worth about UK£2.1m. I generally like to see higher levels of ownership.
So What Do The Mondi Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. Our analysis of Mondi insider transactions leaves us unenthusiastic. And we're not picking up on high enough insider ownership to give us any comfort. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Mondi.
But note: Mondi 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.
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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Mondi plc engages in the manufacture and sale of packaging and paper products in Africa, Western Europe, Emerging Europe, Russia, North America, South America, Asia, and Australia.
Flawless balance sheet with outstanding track record and pays a dividend.