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 Lian Beng Group Ltd (SGX:L03).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Lian Beng Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Executive Chairman & MD Pang Aik Ong for S$186k worth of shares, at about S$0.47 per share. That means that an insider was happy to buy shares at around the current price of S$0.50. 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 bought shares at close to current prices. Pang Aik Ong was the only individual insider to buy shares in the last twelve months.
Pang Aik Ong bought 955k shares over the last 12 months at an average price of S$0.47. You can see a visual depiction of insider transactions (by 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!
Lian Beng 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 Lian Beng 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Lian Beng Group insiders own about S$39m worth of shares. That equates to 16% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Lian Beng Group Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Lian Beng Group and we see no evidence to suggest they are worried about the future. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
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.
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.
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