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 we'll take a look at whether insiders have been buying or selling shares in Legal & General Group Plc (LON:LGEN).
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 don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Legal & General Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Philip John Broadley for UK£75k worth of shares, at about UK£1.80 per share. Even though the purchase was made at a significantly lower price than the recent price (UK£2.77), we still think insider buying is a positive. 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.
Legal & General Group insiders may have bought shares in the last year, but they didn't sell any. The average buy price was around UK£1.99. We don't deny that it is nice to see insiders buying stock in the company. However, we do note that they were buying at significantly lower prices than today's share price. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Insiders at Legal & General Group Have Bought Stock Recently
There was some insider buying at Legal & General Group over the last quarter. Insiders purchased UK£34k worth of shares in that period. We like it when there are only buyers, and no sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.
Insider Ownership of Legal & General Group
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Legal & General Group insiders own about UK£13m worth of shares. That equates to 0.08% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Legal & General Group Tell Us?
We note a that there has been a bit of insider buying recently (but no selling). That said, the purchases were not large. However, our analysis of transactions over the last year is heartening. Insiders own shares in Legal & General Group and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Legal & General Group has 2 warning signs and it would be unwise to ignore them.
But note: Legal & General 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.