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 GigaMedia Limited (NASDAQ:GIGM).
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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
GigaMedia Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Chairman Cheng-Ming Huang for US$419k worth of shares, at about US$2.91 per share. So it’s clear an insider wanted to buy, even at a higher price. Their view may have changed since then, but at least it shows they felt optimistic at the time. It’s not at all bad to see insiders buy shares at or above current prices. The only individual insider to buy over the last year was Cheng-Ming Huang.
Cheng-Ming Huang purchased 363.26k shares over the year. The average price per share was US$2.91. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
GigaMedia 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.
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. Insiders own 39% of GigaMedia shares, worth about US$12m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At GigaMedia Tell Us?
It’s certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. But we don’t feel the same about the fact the company is making losses. Insiders likely see value in GigaMedia shares, given these transactions (along with notable insider ownership of the company). I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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.
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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.