It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell Donaco International Limited (ASX:DNA), you may well want to know whether insiders have been buying or selling.
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 in the 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 equally, we would consider it foolish to ignore insider transactions altogether. 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.
The Last 12 Months Of Insider Transactions At Donaco International
In the last twelve months, the biggest single sale by an insider was when the insider, Keong Lim, sold AU$4.8m worth of shares at a price of AU$0.14 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is AU$0.086. So it is hard to draw any strong conclusion from it. The only individual insider seller over the last year was Keong Lim.
Over the last year, we can see that insiders have bought 13219413 shares worth AU$1.5m. But insiders sold 34208800 shares worth AU$4.8m. You can see the insider transactions (by individuals) over the last year depicted in the chart 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).
Donaco International Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Donaco International shares over the last three months. We note insider Keong Lim cashed in AU$4.8m worth of shares. On the other hand we note insiders bought AU$1.5m worth of shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the company has been fully valued in recent months.
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. We usually like to see fairly high levels of insider ownership. Donaco International insiders own about AU$13m worth of shares. That equates to 18% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Donaco International Tell Us?
The insider sales have outweighed the insider buying, at Donaco International, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! Along with insider transactions, I recommend checking if Donaco International is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Donaco International 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.
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.