We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Think Childcare Limited (ASX:TNK), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
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The Last 12 Months Of Insider Transactions At Think Childcare
Over the last year, we can see that the biggest insider sale was by MD, CEO & Director Mathew Edwards for AU$260k worth of shares, at about AU$1.30 per share. That means that even when the share price was below the current price of AU$1.43, an insider wanted to cash in some shares. While sellers have a variety of reasons for selling, this isn’t particularly great to see. As a general rule we consider it to be discouraging when insiders are selling below the current price. We note that the biggest single sale was only 1.4% of Mathew Edwards’s holding.
We note that in the last year insiders divested 306.89k shares for a total of AU$420k. Over the last year we saw more insider selling of Think Childcare shares, than buying. The sellers received a price of around AU$1.37, on average. It’s not ideal to see that insiders have sold at around the current price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. The chart below shows insider transactions (by 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!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Think Childcare Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Think Childcare. In total, Mathew Edwards sold AU$260k worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does Think Childcare Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Think Childcare insiders own about AU$25m worth of shares. That equates to 35% 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 Think Childcare Tell Us?
An insider hasn’t bought Think Childcare stock in the last three months, but there was some selling. And even if we look to the last year, we didn’t see any purchases. While insiders do own shares, they don’t own a heap, and they have been selling. We’d think twice before buying! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course Think Childcare may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.