Have Insiders Been Selling Master Drilling Group Limited (JSE:MDI) Shares?

By
Simply Wall St
Published
December 14, 2020

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 we'll take a look at whether insiders have been buying or selling shares in Master Drilling Group Limited (JSE:MDI).

What Is Insider Selling?

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.

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

See our latest analysis for Master Drilling Group

The Last 12 Months Of Insider Transactions At Master Drilling Group

Over the last year, we can see that the biggest insider sale was by the CFO, Financial Director & Executive Director, André van Deventer, for R4.8m worth of shares, at about R6.60 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of R7.14. 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. 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 99% of André van Deventer's holding. The only individual insider seller over the last year was André van Deventer.

In the last twelve months insiders purchased 115.00k shares for R1.1m. On the other hand they divested 727.65k shares, for R4.8m. 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!

JSE:MDI Insider Trading Volume December 15th 2020

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Does Master Drilling Group Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Our data suggests Master Drilling Group insiders own 2.2% of the company, worth about R23m. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We prefer to see high levels of insider ownership.

What Might The Insider Transactions At Master Drilling Group Tell Us?

The fact that there have been no Master Drilling Group insider transactions recently certainly doesn't bother us. We don't take much encouragement from the transactions by Master Drilling Group insiders. But it's good to see that insiders own shares in the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. When we did our research, we found 2 warning signs for Master Drilling Group (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

But note: Master Drilling Group 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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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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