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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell ThinkSmart Limited (LON:TSL), 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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
ThinkSmart Insider Transactions Over The Last Year
The Independent Non-Executive Director Peter Joshua Gammell made the biggest insider purchase in the last 12 months. That single transaction was for UK£480k worth of shares at a price of UK£0.24 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of UK£0.78. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
While ThinkSmart insiders bought shares during the last year, they didn't sell. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
ThinkSmart is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of ThinkSmart
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. I reckon it's a good sign if insiders own a significant number of shares in the company. ThinkSmart insiders own about UK£33m worth of shares (which is 40% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About ThinkSmart Insiders?
The fact that there have been no ThinkSmart insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like ThinkSmart insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. 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. When we did our research, we found 2 warning signs for ThinkSmart (1 is concerning!) that we believe deserve your full attention.
But note: ThinkSmart 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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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