We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Serko Limited (NZSE:SKO).
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, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Serko Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Head of Business Development, John Challis, for NZ$991k worth of shares, at about NZ$5.04 per share. That means that even when the share price was below the current price of NZ$5.60, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 32% of John Challis's holding.
Happily, we note that in the last year insiders paid NZ$97k for 27.15k shares. But insiders sold 300.00k shares worth NZ$1.5m. Over the last year we saw more insider selling of Serko shares, than buying. The sellers received a price of around NZ$5.05, on average. We don't gain confidence from insider selling below the recent share price. Since insiders sell for many reasons, we wouldn't put too much weight on it. 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!
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).
Insiders at Serko Have Bought Stock Recently
We saw some Serko insider buying shares in the last three months. Insiders purchased NZ$24k worth of shares in that period. We like it when there are only buyers, and no sellers. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.
Insider Ownership of Serko
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Serko insiders own about NZ$251m worth of shares (which is 42% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Serko Insiders?
We note a that there has been a bit of insider buying recently (but no selling). The net investment is not enough to encourage us much. It's great to see high levels of insider ownership, but looking back over the last year, we'd need to see more buying to gain confidence from the Serko insider transactions. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Serko. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Serko.
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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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