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 Wellness and Beauty Solutions Limited (ASX:WNB).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Wellness and Beauty Solutions
insider Geoffrey Pearce made the biggest insider purchase in the last 12 months. That single transaction was for AU$207k worth of shares at a price of AU$0.019 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.005). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. 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.
Wellness and Beauty Solutions insiders may have bought shares in the last year, but they didn't sell any. Their average price was about AU$0.014. I'd consider this a positive as it suggests insiders see value at around the current price. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
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).
Insider Ownership of Wellness and Beauty Solutions
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that Wellness and Beauty Solutions insiders own about AU$986k worth of shares (which is 14% of the company). Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Do The Wellness and Beauty Solutions Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. The transactions are fine but it'd be more encouraging if Wellness and Beauty Solutions insiders bought more shares in the company. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 6 warning signs for Wellness and Beauty Solutions you should be aware of, and 4 of them are potentially serious.
Of course Wellness and Beauty Solutions 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.
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.
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