It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Altium Limited (ASX:ALU).
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.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
Altium Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Independent Non-Executive Chairman, Samuel Weiss, for AU$930k worth of shares, at about AU$23.26 per share. That means that even when the share price was below the current price of AU$32.15, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 2.1% of Samuel Weiss's holding.
In the last twelve months insiders purchased 20406 shares for AU$396k. But they sold 65328 for AU$1.6m. Over the last year we saw more insider selling of Altium shares, than buying. They sold for an average price of about US$25.11. We don't gain confidence from insider selling below the recent share price. But we wouldn't put too much weight on the insider selling. 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Does Altium Boast High Insider Ownership?
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. Altium insiders own 11% of the company, currently worth about AU$452m based on the recent share price. 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 Does This Data Suggest About Altium Insiders?
The fact that there have been no Altium insider transactions recently certainly doesn't bother us. While we feel good about high insider ownership of Altium, we can't say the same about the selling of shares. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Altium.
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 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. Thank you for reading.