We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Gas2Grid Limited (ASX:GGX).
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, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. 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.
Gas2Grid Insider Transactions Over The Last Year
MD & Executive Director Dennis Morton made the biggest insider purchase in the last 12 months. That single transaction was for AU$100k worth of shares at a price of AU$0.003 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.004), 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.
While Gas2Grid insiders bought shares last year, they didn't sell. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Insiders at Gas2Grid Have Bought Stock Recently
Over the last quarter, Gas2Grid insiders have spent a meaningful amount on shares. In total, insiders bought AU$130k worth of shares in that time, and we didn't record any sales whatsoever. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Gas2Grid
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Gas2Grid insiders own about AU$1.7m 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 Gas2Grid Tell Us?
It is good to see recent purchasing. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Gas2Grid. One for the watchlist, at least! I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free.
But note: Gas2Grid 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.
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.