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 Drax Group plc (LON:DRX), 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 on the market. 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
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The Last 12 Months Of Insider Transactions At Drax Group
Group CEO & Executive Director Dwight Daniel Gardiner made the biggest insider purchase in the last 12 months. That single transaction was for UK£200k worth of shares at a price of UK£3.59 each. That means that an insider was happy to buy shares at around the current price. Of course they may have changed their mind. But this suggests they are optimistic. Nonetheless, we consider it positive if insiders want to buy at around the current share price. The only individual insider to buy over the last year was Dwight Daniel Gardiner.
Dwight Daniel Gardiner bought a total of 87.10k shares over the year at an average price of UK£3.44. 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!
Drax Group 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 Drax Group
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data suggests Drax Group insiders own 0.07% of the company, worth about UK£1.0m. We consider this fairly low insider ownership.
So What Does This Data Suggest About Drax Group Insiders?
It’s certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn’t make a profit over the last twelve months, which makes us cautious. While the overall levels of insider ownership are below what we’d like to see, the history of transactions imply that Drax Group insiders are reasonably well aligned, and optimistic for the future. 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: Drax Group 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.