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 shareholders might well want to know whether insiders have been buying or selling shares in Reach Subsea ASA (OB:REACH).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. 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.’
The Last 12 Months Of Insider Transactions At Reach Subsea
In the last twelve months, the biggest single sale by an insider was when the Director, Anders Onarheim, sold kr4.2m worth of shares at a price of kr2.37 per share. That means that an insider was selling shares at around the current price of kr2.04. We generally don’t like to see insider selling, but the lower the sale price, the more it concerns us. In this case, the big sale took place at around the current price, so it’s not too bad (but it’s still not a positive). Notably Anders Onarheim was also the biggest buyer, having purchased kr118k worth of shares.
Over the last year we saw more insider selling of Reach Subsea shares, than buying. 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!
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. Insiders own 9.2% of Reach Subsea shares, worth about kr27m, according to our data. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We do generally prefer see higher levels of insider ownership.
So What Do The Reach Subsea Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded Reach Subsea shares in the last quarter. Still, the insider transactions at Reach Subsea in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. Along with insider transactions, I recommend checking if Reach Subsea is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Reach Subsea 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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