We often see insiders buying up shares in companies that perform well over the long term. 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 Tiziana Life Sciences PLC (LON:TILS).
Do Insider Transactions Matter?
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 don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Tiziana Life Sciences
In fact, the recent purchase by Founder & Executive Chairman Gabriele Marco Cerrone was not their only acquisition of Tiziana Life Sciences shares this year. They previously made an even bigger purchase of UK£132k worth of shares at a price of UK£2.11 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being UK£0.42). 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 is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Gabriele Marco Cerrone was the only individual insider to buy over the year.
Gabriele Marco Cerrone bought 137.00k shares over the last 12 months at an average price of UK£1.27. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Tiziana Life Sciences insiders own 47% of the company, worth about UK£27m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Tiziana Life Sciences Insider Transactions Indicate?
The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest Tiziana Life Sciences insiders are well aligned, and quite possibly think the share price is too low. That's what I like to see! 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.
But note: Tiziana Life Sciences 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. We currently account for open market transactions and private dispositions, but not derivative transactions.
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