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 before you buy or sell Computershare Limited (ASX:CPU), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. 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.’
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Computershare Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Penelope Maclagan for AU$4.5m worth of shares, at about AU$18.12 per share. So we know that an insider sold shares at around the present share price of AU$17.85. While their view may have changed since the sale, this is not a particularly positive fact. We generally tread carefully if insiders have been selling on market, even if they sold slightly above the current price. Penelope Maclagan was the only individual insider to sell shares in the last twelve months.
Happily, we note that in the last year insiders paid AU$452k for 25.20k shares. On the other hand they divested 275.00k shares, for AU$5.0m. Penelope Maclagan divested 275.00k shares over the last 12 months at an average price of US$18.20. 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!
I will like Computershare better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Computershare
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Computershare insiders own about AU$668m worth of shares (which is 6.9% of the company). 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 Computershare Insider Transactions Indicate?
The fact that there have been no Computershare insider transactions recently certainly doesn’t bother us. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the Computershare insiders selling. 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.
But note: Computershare 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.