We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell TomTom N.V. (AMS:TOM2T), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. 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 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'.
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TomTom Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Co-Founder Harold C. Goddijn for €399k worth of shares, at about €6.24 per share. Even though the purchase was made at a significantly lower price than the recent price (€7.86), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Over the last year, we can see that insiders have bought 86484.75 shares worth €540k. But they sold 22500.1 for €311k. In the last twelve months there was more buying than selling by TomTom insiders. You can see the insider transactions (by individuals) over the last year depicted in the chart 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).
TomTom Insiders Bought Stock Recently
There has been significantly more insider buying, than selling, at TomTom, over the last three months. In fact, two insiders bought €540k worth of shares. But Alain De Taeye sold shares worth €311k. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. TomTom insiders own about €913m worth of shares (which is 50% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At TomTom Tell Us?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Once you factor in the high insider ownership, it certainly seems like insiders are positive about TomTom. One for the watchlist, at least! Of course, the future is what matters most. So if you are interested in TomTom, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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 email@example.com. 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.