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 3i Group plc (LON:III).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
The Last 12 Months Of Insider Transactions At 3i Group
The CEO & Executive Director Simon Borrows made the biggest insider purchase in the last 12 months. That single transaction was for UK£771k worth of shares at a price of UK£7.71 each. So it's clear an insider wanted to buy, at around the current price, which is UK£9.15. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. Happily, the 3i Group insiders decided to buy shares at close to current prices.
Happily, we note that in the last year insiders paid UK£1.2m for 149.56k shares. On the other hand they divested 46.61k shares, for UK£379k. In total, 3i Group insiders bought more than they sold over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
3i Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at 3i Group Have Sold Stock Recently
There was substantially more insider selling, than buying, of 3i Group shares over the last three months. In that time, Group Finance Director & Executive Director Julia Wilson dumped UK£379k worth of shares. Meanwhile insiders bought UK£155k worth. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.
Insider Ownership of 3i Group
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. 3i Group insiders own 1.8% of the company, currently worth about UK£159m 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.
So What Does This Data Suggest About 3i Group Insiders?
The insider sales have outweighed the insider buying, at 3i Group, in the last three months. On the other hand, the insider transactions over the last year are encouraging. We are also comforted by the high levels of insider ownership. So we're not too bothered by recent selling. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing 3i Group. For example - 3i Group has 2 warning signs we think you should be aware of.
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.
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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