It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Synlait Milk Limited (NZSE:SML).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
Synlait Milk Insider Transactions Over The Last Year
The General Manager of Innovation & Technical Services, Roger Schwarzenbach, made the biggest insider sale in the last 12 months. That single transaction was for NZ$99k worth of shares at a price of NZ$5.09 each. So we know that an insider sold shares at around the present share price of NZ$4.28. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
Over the last year, we can see that insiders have bought 9.78k shares worth NZ$61k. But they sold 29.37k shares for NZ$154k. In total, Synlait Milk insiders sold more than they bought over the last year. They sold for an average price of about NZ$5.23. It is certainly not great to see that insiders have sold shares in the company. But we note that the selling, on average, was at well above the recently traded price of NZ$4.28. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Synlait Milk 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 Synlait Milk Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Synlait Milk. In total, General Manager of Innovation & Technical Services Roger Schwarzenbach dumped NZ$99k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Insider Ownership of Synlait Milk
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. It appears that Synlait Milk insiders own 3.4% of the company, worth about NZ$32m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Synlait Milk Tell Us?
An insider hasn't bought Synlait Milk stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. While insiders do own shares, they don't own a heap, and they have been selling. So we'd only buy after careful consideration. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 4 warning signs for Synlait Milk you should be aware of, and 1 of them is a bit concerning.
Of course Synlait Milk 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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