We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell 2020 Bulkers Ltd (OB:2020), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At 2020 Bulkers
Over the last year, we can see that the biggest insider purchase was by Independent Director Jeremy Kramer for kr3.6m worth of shares, at about kr789 per share. That means that an insider was happy to buy shares at above the current price of kr44.70. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
While 2020 Bulkers insiders bought shares last year, they didn't sell. Their average price was about kr222. This is nice to see since it implies that insiders might see value around current prices. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
2020 Bulkers is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at 2020 Bulkers Have Bought Stock Recently
Over the last three months, we've seen a bit of insider buying at 2020 Bulkers. Chief Technology Officer Olav Eikrem purchased kr238k worth of shares in that period. It's good to see the insider buying, as well as the lack of recent sellers. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 12% of 2020 Bulkers shares, worth about kr120m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The 2020 Bulkers Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about 2020 Bulkers. Nice! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 5 warning signs (3 are a bit unpleasant!) that you ought to be aware of before buying any shares in 2020 Bulkers.
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.
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.
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