We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Adelaide Brighton Limited (ASX:ABC).
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 in the company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Adelaide Brighton
Over the last year, we can see that the biggest insider purchase was by Deputy Chairman & Lead Independent Director Zlatko Todorcevski for AU$105k worth of shares, at about AU$3.50 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$3.33). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months Adelaide Brighton insiders were buying shares, but not selling. 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!
Adelaide Brighton is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of Adelaide Brighton
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Adelaide Brighton insiders own about AU$16m worth of shares. That equates to 0.7% 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.
So What Do The Adelaide Brighton Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Adelaide Brighton insiders are doubting the company, and they do own shares. Of course, the future is what matters most. So if you are interested in Adelaide Brighton, you should check out this free report on analyst forecasts for the company.
But note: Adelaide Brighton 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.
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.
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