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 Service Stream Limited (ASX:SSM).
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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Service Stream Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the MD & Director, Leigh MacKender, for AU$2.9m worth of shares, at about AU$2.10 per share. That means that even when the share price was below the current price of AU$2.73, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was 57.1% of Leigh MacKender's holding.
In the last twelve months insiders netted AU$3.9m for 4.1m shares sold. Insiders in Service Stream didn't buy any shares in the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Service Stream
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Service Stream insiders own 16% of the company, worth about AU$173m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Service Stream Insiders?
It doesn't really mean much that no insider has traded Service Stream shares in the last quarter. While we feel good about high insider ownership of Service Stream, we can't say the same about the selling of shares. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Service Stream.
Of course Service Stream may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.