It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell Hills Limited (ASX:HIL), you may well want to know whether insiders have been buying or selling.
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.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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.'
Hills Insider Transactions Over The Last Year
insider Jack Mordes made the biggest insider purchase in the last 12 months. That single transaction was for AU$342k worth of shares at a price of AU$0.28 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.27). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
In the last twelve months insiders paid AU$543k for 2.1m shares purchased. Hills insiders may have bought shares in the last year, but they didn't sell any. 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 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 Hills Have Bought Stock Recently
Over the last quarter, Hills insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought AU$534k worth of shares. That shows some optimism about the company's future.
Insider Ownership of Hills
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that Hills insiders own about AU$4.1m worth of shares (which is 6.9% of the company). However, it's possible that insiders might have an indirect interest through a more complex structure. Whilst better than nothing, we're not overly impressed by these holdings.
What Might The Insider Transactions At Hills Tell Us?
The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Hills insiders are expecting a bright future. Along with insider transactions, I recommend checking if Hills is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course Hills 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.
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 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. Thank you for reading.