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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 shareholders might well want to know whether insiders have been buying or selling shares in Whitehaven Coal Limited (ASX:WHC).
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 on the market. 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 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.'
The Last 12 Months Of Insider Transactions At Whitehaven Coal
The MD, CEO & Director, Paul Flynn, made the biggest insider sale in the last 12 months. That single transaction was for AU$3.3m worth of shares at a price of AU$4.98 each. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The good news is that this large sale was at well above current price of AU$3.60. So it is hard to draw any strong conclusion from it.
Happily, we note that in the last year insiders paid AU$806k for 164k shares. But they sold 1.3m for AU$6.4m. In total, Whitehaven Coal 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. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Whitehaven Coal better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Whitehaven Coal insiders own about AU$320m worth of shares (which is 8.8% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Whitehaven Coal Insider Transactions Indicate?
The fact that there have been no Whitehaven Coal insider transactions recently certainly doesn't bother us. While we feel good about high insider ownership of Whitehaven Coal, we can't say the same about the selling of shares. Of course, the future is what matters most. So if you are interested in Whitehaven Coal, you should check out this free report on analyst forecasts for the company.
But note: Whitehaven Coal 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 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.