Should You Take Comfort From Insider Transactions At Babylon Pump & Power Limited (ASX:BPP)?
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 we'll take a look at whether insiders have been buying or selling shares in Babylon Pump & Power Limited (ASX:BPP).
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
Check out our latest analysis for Babylon Pump & Power
Babylon Pump & Power Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Geoffrey Lord for AU$66k worth of shares, at about AU$0.017 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.022. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Geoffrey Lord bought 6.74m shares over the last 12 months at an average price of AU$0.016. You can see a visual depiction of insider transactions (by companies and 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!
Babylon Pump & Power is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Does Babylon Pump & Power Boast High 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. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Babylon Pump & Power insiders own 29% of the company, worth about AU$7.1m. 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 Babylon Pump & Power Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Babylon Pump & Power shares in the last quarter. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Babylon Pump & Power insiders are doubting the company, and they do own shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Our analysis shows 5 warning signs for Babylon Pump & Power (2 shouldn't be ignored!) and we strongly recommend you look at them before investing.
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.
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.
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