We often see insiders buying up shares in companies that perform well over the long term. 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 Fletcher Building Limited (NZSE:FBU), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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.
Fletcher Building Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chief Executive of Residential & Development Steve Evans bought NZ$136k worth of shares at a price of NZ$4.54 per share. So it's clear an insider wanted to buy, at around the current price, which is NZ$4.64. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. The good news for Fletcher Building share holders is that insiders were buying at near the current price.
Over the last year, we can see that insiders have bought 96.00k shares worth NZ$443k. On the other hand they divested 7483 shares, for NZ$35k. Overall, Fletcher Building insiders were net buyers last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Insiders at Fletcher Building Have Sold Stock Recently
We have seen a bit of insider selling at Fletcher Building, over the last three months. insider John Bell divested only NZ$19k worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the volume sold is so low that it really doesn't bother us.
Does Fletcher Building Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data indicates that Fletcher Building insiders own about NZ$14m worth of shares (which is 0.4% of the company). We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Fletcher Building Insiders?
Our data shows a little more insider selling, but no insider buying, in the last three months. But the sales were small, so we're not concerned. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Fletcher Building insiders are doubting the company, and they do own shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example - Fletcher Building has 3 warning signs we think you should be aware of.
But note: Fletcher Building 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.
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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