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 Healthia Limited (ASX:HLA), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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, 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 Columbia 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'.
The Last 12 Months Of Insider Transactions At Healthia
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Chairman Glen Richards bought AU$300k worth of shares at a price of AU$0.82 per share. So it's clear an insider wanted to buy, at around the current price, which is AU$0.94. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. In this case we're pleased to report that the insider purchases were made at close to current prices.
In the last twelve months Healthia insiders were buying shares, but not selling. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Healthia Insiders Bought Stock Recently
Over the last three months, we've seen a bit of insider buying at Healthia. Independent Non-Executive Director Lisa Dalton shelled out AU$21k for shares in that time. It's great to see that insiders are only buying, not selling. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Healthia insiders own 44% of the company, worth about AU$26m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Healthia Tell Us?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. Overall the buying isn't worth writing home about. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Healthia insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Healthia.
But note: Healthia 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.