We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Inchcape plc (LON:INCH), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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.'
Inchcape Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Group CEO & Executive Director, Stefan Bomhard, for UK£623k worth of shares, at about UK£7.00 per share. So what is clear is that an insider saw fit to sell at around the current price of UK£6.02. While we don't usually like to see insider selling, it's more concerning if the sales take price at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).
In the last twelve months insiders purchased 53535 shares for UK£92k. But they sold 320k for UK£2.0m. In total, Inchcape insiders sold more than they bought over the last year. They sold for an average price of about UK£6.27. We don't gain confidence from insider selling below the recent share price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn't jump to conclusions. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Inchcape better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Inchcape Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Inchcape shares. Specifically, insiders ditched UK£794k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Does Inchcape Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Inchcape insiders own about UK£48m worth of shares. That equates to 2.0% 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 Does This Data Suggest About Inchcape Insiders?
Insiders sold stock recently, but they haven't been buying. And our longer term analysis of insider transactions didn't bring confidence, either. Insiders own shares, but we're still pretty cautious, given the history of sales. So we'd only buy after careful consideration. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Inchcape.
But note: Inchcape 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.
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