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 before you buy or sell NEXT plc (LON:NXT), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
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. 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.
Check out our latest analysis for NEXT
The Last 12 Months Of Insider Transactions At NEXT
In fact, the recent sale by Simon Wolfson was the biggest sale of NEXT shares made by an insider individual in the last twelve months, according to our records. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of UK£67.36. 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. It is worth noting that this sale was only 10.0% of Simon Wolfson’s holding.
Over the last year, we can see that insiders have bought 4590 shares worth UK£206k. On the other hand they divested 153000 shares, for UK£10m. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like NEXT better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at NEXT Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at NEXT. In total, CEO & Executive Director Simon Wolfson sold UK£10m 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.
Insider Ownership
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. NEXT insiders own about UK£126m worth of shares (which is 1.5% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About NEXT Insiders?
An insider hasn’t bought NEXT stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. But it is good to see that NEXT is growing earnings. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. Of course, the future is what matters most. So if you are interested in NEXT, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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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.