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 The a2 Milk Company Limited (NZSE:ATM).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
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. 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 a2 Milk
The insider, Peter Hinton, made the biggest insider sale in the last 12 months. That single transaction was for NZ$4.5m worth of shares at a price of NZ$14.00 each. So we know that an insider sold shares at around the present share price of NZ$13.21. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern. The only individual insider seller over the last year was Peter Hinton.
You can see the insider transactions (by 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Does a2 Milk Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that a2 Milk insiders own 0.6% of the company, worth about NZ$54m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About a2 Milk Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. Our analysis of a2 Milk insider transactions leaves us cautious. But it's good to see that insiders own shares in the company. Of course, the future is what matters most. So if you are interested in a2 Milk, you should check out this free report on analyst forecasts for the company.
But note: a2 Milk 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.
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 email@example.com. 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.