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 we'll take a look at whether insiders have been buying or selling shares in McMillan Shakespeare Limited (ASX:MMS).
What Is Insider Buying?
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.
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. 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.'
McMillan Shakespeare Insider Transactions Over The Last Year
Independent Non-Executive Director Helen Kurincic made the biggest insider purchase in the last 12 months. That single transaction was for AU$133k worth of shares at a price of AU$12.11 each. So it's clear an insider wanted to buy, at around the current price, which is AU$12.93. Of course they may have changed their mind. But this suggests they are optimistic. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the McMillan Shakespeare insiders decided to buy shares at close to current prices.
In the last twelve months insiders paid AU$266k for 22000 shares purchased. In the last twelve months McMillan Shakespeare insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
McMillan Shakespeare is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
McMillan Shakespeare Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at McMillan Shakespeare. Not only was there no selling that we can see, but they collectively bought AU$266k worth of shares. That shows some optimism about the company's future.
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that McMillan Shakespeare insiders own 5.3% of the company, worth about AU$58m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The McMillan Shakespeare Insider Transactions Indicate?
It's certainly positive to see the recent insider purchases. We also take confidence from the longer term picture of insider transactions. Given that insiders also own a fair bit of McMillan Shakespeare we think they are probably pretty confident of a bright future. Of course, the future is what matters most. So if you are interested in McMillan Shakespeare, you should check out this free report on analyst forecasts for the company.
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.