We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Incitec Pivot Limited (ASX:IPL).
What Is Insider Selling?
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 equally, we would consider it foolish to ignore insider transactions altogether. 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 Incitec Pivot
Over the last year, we can see that the biggest insider purchase was by MD, CEO & Director Jeanne Johns for AU$499k worth of shares, at about AU$3.17 per share. That means that even when the share price was higher than AU$3.16 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
In the last twelve months insiders purchased 189k shares for AU$599k. On the other hand they divested 13100 shares, for AU$50k. Overall, Incitec Pivot insiders were net buyers last year. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Incitec Pivot is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Incitec Pivot Have Bought Stock Recently
Over the last quarter, Incitec Pivot insiders have spent a meaningful amount on shares. We can see that Jeanne Johns paid AU$499k for shares in the company. No-one sold. This could be interpreted as suggesting a positive outlook.
Does Incitec Pivot Boast High Insider Ownership?
Many investors like to check how much of a company is owned by 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. Our data indicates that Incitec Pivot insiders own about AU$7.7m worth of shares (which is 0.2% of the company). We do generally prefer see higher levels of insider ownership.
So What Do The Incitec Pivot Insider Transactions Indicate?
The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Incitec Pivot insiders are expecting a bright future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Incitec Pivot.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.