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 Australian Pharmaceutical Industries Limited (ASX:API).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Australian Pharmaceutical Industries Insider Transactions Over The Last Year
Non-Executive Chairman Mark Smith made the biggest insider purchase in the last 12 months. That single transaction was for AU$107k worth of shares at a price of AU$1.52 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$1.27). 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. To us, it's very important to consider the price insiders pay for shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Mark Smith was the only individual insider to buy shares in the last twelve months.
Mark Smith bought 135000 shares over the last 12 months at an average price of AU$1.44. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Does Australian Pharmaceutical Industries Boast High Insider Ownership?
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. From our data, it seems that Australian Pharmaceutical Industries insiders own 1.8% of the company, worth about AU$11m. We do generally prefer see higher levels of insider ownership.
What Might The Insider Transactions At Australian Pharmaceutical Industries Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Australian Pharmaceutical Industries and their transactions don't cause us concern. Of course, the future is what matters most. So if you are interested in Australian Pharmaceutical Industries, you should check out this free report on analyst forecasts for the company.
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.
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.
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