It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Biome Technologies plc (LON:BIOM).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
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.
Biome Technologies Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Non-Executive Chairman John Standen for UK£115k worth of shares, at about UK£4.00 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being UK£2.80). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. The only individual insider to buy over the last year was John Standen. We note that John Standen was both the biggest buyer and the biggest seller.
John Standen bought 30836 shares over the last 12 months at an average price of UK£3.97. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Biome Technologies
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. Biome Technologies insiders own about UK£1.7m worth of shares. That equates to 22% 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 Biome Technologies Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Biome Technologies shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Biome Technologies and their transactions don't cause us concern. Of course, the future is what matters most. So if you are interested in Biome Technologies, you should check out this free report on analyst forecasts for the company.
Of course Biome Technologies may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.
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