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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Micro Focus International plc (LON:MCRO).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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.'
Micro Focus International Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Senior Independent Non-Executive Director Karen Slatford for UK£99k worth of shares, at about UK£12.71 per share. Even though the purchase was made at a significantly lower price than the recent price (UK£21.00), we still think insider buying is a positive. But because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Happily, we note that in the last year insiders paid UK£212k for 15455 shares. But insiders sold 2800 shares worth UK£49k. In the last twelve months there was more buying than selling by Micro Focus International insiders. 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!
Micro Focus International 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.
Insider Ownership of Micro Focus International
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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 Micro Focus International insiders own 0.6% of the company, worth about UK£41m. 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 Micro Focus International Insider Transactions Indicate?
The fact that there have been no Micro Focus International insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Overall we don't see anything to make us think Micro Focus International insiders are doubting the company, and they do own shares. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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.