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 we’ll take a look at whether insiders have been buying or selling shares in Service Stream Limited (ASX:SSM).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

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. 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.’

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The Last 12 Months Of Insider Transactions At Service Stream

MD & Director Leigh MacKender made the biggest insider sale in the last 12 months. That single transaction was for AU$2.1m worth of shares at a price of AU$1.59 each. So it’s clear an insider wanted to take some cash off the table, even below the current price of AU$1.79. While their view may have changed since they sold, this isn’t a particularly bullish sign. When an insider sells below the current price, it does tend to make us wonder about the current valuation. Please note, however, that this single sale was just 47.3% of Leigh MacKender’s stake. Leigh MacKender was the only individual insider to sell over the last year.

The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. It appears that Service Stream insiders own 16% of the company, worth about AU$110m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Service Stream Tell Us?

It doesn’t really mean much that no insider has traded Service Stream 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 Service Stream insider transactions don’t fill us with confidence. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Service Stream.

But note: Service Stream 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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.