It is not uncommon to see companies perform well in the years after insiders buy shares. 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 NZ Windfarms Limited (NZSE:NWF), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 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'.
The Last 12 Months Of Insider Transactions At NZ Windfarms
The insider, Philip Lennon, made the biggest insider sale in the last 12 months. That single transaction was for NZ$758k worth of shares at a price of NZ$0.13 each. So it's clear an insider wanted to take some cash off the table, even below the current price of NZ$0.19. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was 100% of Philip Lennon's holding. Philip Lennon was the only individual insider to sell over the last year. Notably Philip Lennon was also the biggest buyer, having purchased NZ$224k worth of shares.
Philip Lennon ditched 17.03m shares over the year. The average price per share was NZ$0.13. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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 NZ Windfarms insiders own 25% of the company, worth about NZ$14m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The NZ Windfarms Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. We don't take much encouragement from the transactions by NZ Windfarms insiders. But it's good to see that insiders own shares in the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Case in point: We've spotted 3 warning signs for NZ Windfarms you should be aware of.
But note: NZ Windfarms 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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