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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 AMA Group Limited (ASX:AMA).
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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 AMA Group
Over the last year, we can see that the biggest insider sale was by the Chief Executive Officer and Executive Director, Andrew Hopkins, for AU$16m worth of shares, at about AU$0.95 per share. That means that even when the share price was below the current price of AU$1.39, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 33.3% of Andrew Hopkins's holding. The only individual insider seller over the last year was Andrew Hopkins.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
AMA Group Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at AMA Group. We can see that Anthony Day paid AU$119k for shares in the company. No-one sold. That shows some optimism about the company's future.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 14% of AMA Group shares, worth about AU$103m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The AMA Group Insider Transactions Indicate?
The recent insider purchase is heartening. But we can't say the same for the transactions over the last 12 months. Overall, we'd prefer see a more sustained buying from directors, but with a significant insider holding and more recent purchases, AMA Group insiders are reasonably well aligned, and optimistic for the future. Of course, the future is what matters most. So if you are interested in AMA Group, you should check out this free report on analyst forecasts for the company.
Of course AMA 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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.