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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Ramsay Health Care Limited (ASX:RHC), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. 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.'
The Last 12 Months Of Insider Transactions At Ramsay Health Care
Over the last year, we can see that the biggest insider sale was by CEO, MD & Executive Director Craig McNally for AU$4.8m worth of shares, at about AU$64.02 per share. So what is clear is that an insider saw fit to sell at around the current price of AU$63.72. While their view may have changed since the sale, this is not a particularly positive fact. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
We note that in the last year insiders divested 170.00k shares for a total of AU$11m. All up, insiders sold more shares in Ramsay Health Care than they bought, over the last year. The average sell price was around AU$63.75. It's not particularly great to see insiders were selling shares around current prices. But we don't put too much weight on the insider selling, since sellers could have personal reasons. 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!
I will like Ramsay Health Care better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Ramsay Health Care Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Ramsay Health Care. Specifically, insiders ditched AU$6.1m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Ramsay Health Care
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Ramsay Health Care insiders own 2.8% of the company, currently worth about AU$356m based on the recent share price. 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 Ramsay Health Care Insiders?
Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course Ramsay Health Care may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.