As Ocado Group plc's market cap (LON:OCDO) drops to UK£5.9b, insiders might be questioning their decision to buy earlier this year
The recent price decline of 13% in Ocado Group plc's (LON:OCDO) stock may have disappointed insiders who bought UK£13m worth of shares at an average price of UK£19.53 in the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only UK£5.4m.
Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
Check out our latest analysis for Ocado Group
Ocado Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Jorn Rausing for UK£13m worth of shares, at about UK£19.58 per share. That means that even when the share price was higher than UK£8.00 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
In the last twelve months Ocado Group insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and 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!
Ocado Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Ocado Group Insiders Bought Stock Recently
We saw some Ocado Group insider buying shares in the last three months. Independent Non-Executive Director Julie Southern shelled out UK£9.9k for shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.
Insider Ownership
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. Ocado Group insiders own about UK£803m worth of shares (which is 14% 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 Ocado Group Insiders?
We note a that there has been a bit of insider buying recently (but no selling). Overall the buying isn't worth writing home about. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Ocado Group insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Ocado Group. Every company has risks, and we've spotted 2 warning signs for Ocado Group you should know about.
Of course Ocado Group 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
