It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Brickworks Limited (ASX:BKW), you may well want to know whether insiders have been buying or selling.
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, such insiders must disclose their trading activities, and not trade on inside information.
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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
The Last 12 Months Of Insider Transactions At Brickworks
In the last twelve months, the biggest single purchase by an insider was when MD & Executive Director Lindsay Partridge bought AU$678k worth of shares at a price of AU$16.95 per share. So it's clear an insider wanted to buy, at around the current price, which is AU$18.26. 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. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the Brickworks insiders decided to buy shares at close to current prices. We note that Lindsay Partridge was both the biggest buyer and the biggest seller.
Happily, we note that in the last year insiders paid AU$698k for 41110 shares. But they sold 82000 for AU$1.4m. In total, Brickworks insiders sold more than they bought over the last year. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Brickworks insiders own 3.9% of the company, worth about AU$107m. 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 Does This Data Suggest About Brickworks Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back at the last year, we don't gain confidence from the Brickworks insiders selling. Of course, the future is what matters most. So if you are interested in Brickworks, you should check out this free report on analyst forecasts for the company.
Of course Brickworks may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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 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. Thank you for reading.