Possible Bearish Signals With Discovery Insiders Disposing Stock

Many Discovery Limited (JSE:DSY) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Discovery

The Last 12 Months Of Insider Transactions At Discovery

Over the last year, we can see that the biggest insider sale was by the Founder, Adrian Gore, for R29m worth of shares, at about R118 per share. That means that an insider was selling shares at slightly below the current price (R151). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 0.3% of Adrian Gore's holding.

Discovery insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and 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!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Does Discovery Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Discovery insiders own 17% of the company, currently worth about R17b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Discovery Tell Us?

It doesn't really mean much that no insider has traded Discovery shares in the last quarter. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Discovery insider transactions don't fill us with confidence. 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 1 warning sign for Discovery you should be aware of.

Of course Discovery 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.