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 IVE Group Limited (ASX:IGL).
What Is Insider Selling?
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 don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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 IVE Group
Over the last year, we can see that the biggest insider purchase was by Executive Chairman Geoff Selig for AU$915k worth of shares, at about AU$1.83 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$1.34). 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. 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.
While IVE Group insiders bought shares during the last year, they didn't sell. Their average price was about AU$1.06. To my mind it is good that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. You can see a visual depiction of insider transactions (by companies and 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Does IVE Group 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 15% of IVE Group shares, worth about AU$30m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The IVE Group Insider Transactions Indicate?
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 own shares in IVE Group and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing IVE Group. To help with this, we've discovered 2 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in IVE Group.
But note: IVE Group 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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.