It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in HomeServe plc (LON:HSV).
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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Colombia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
HomeServe Insider Transactions Over The Last Year
Martin Bennett made the biggest insider sale in the last 12 months. That single transaction was for UK£3.7m worth of shares at a price of UK£8.75 each. That means that an insider was selling shares at around the current price of UK£8.66. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
In the last twelve months insiders netted UK£7.8m for 868.59k shares sold. All up, insiders sold more shares in HomeServe than they bought, over the last year. The sellers received a price of around UK£8.96, on average. It’s not particularly great to see insiders were selling shares around current prices. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see a visual depiction of insider transactions 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!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Does HomeServe Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. HomeServe insiders own about UK£367m worth of shares (which is 13% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About HomeServe Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. It’s heartening that insiders own plenty of stock, but we’d like to see more insider buying, since the last year of HomeServe insider transactions don’t fill us with confidence. Of course, the future is what matters most. So if you are interested in HomeServe, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity 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 firstname.lastname@example.org.