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Read This Before Selling RedFlow Limited (ASX:RFX) Shares

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Blake Harford
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It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell RedFlow Limited (ASX:RFX), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

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.

We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’

View our latest analysis for RedFlow

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RedFlow Insider Transactions Over The Last Year

System Integration Architect Simon Hackett made the biggest insider purchase in the last 12 months. That single transaction was for AU$1.9m worth of shares at a price of AU$0.10 each. That means that even when the share price was higher, an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. We generally consider it a positive if insiders have been buying on market, even above the current price.

Over the last year, we can see that insiders have bought 20.03m shares worth AU$2.0m. In total, RedFlow insiders bought more than they sold over the last year. Their average price was about AU$0.10. These transactions suggest that insiders have considered the current price of AU$0.079 attractive. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

ASX:RFX Insider Trading January 30th 19
ASX:RFX Insider Trading January 30th 19

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 29% of RedFlow shares, worth about AU$17m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At RedFlow Tell Us?

It doesn’t really mean much that no insider has traded RedFlow shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in RedFlow and we see no evidence to suggest they are worried about the future. Of course, the future is what matters most. So if you are interested in RedFlow, you should check out this free report on analyst forecasts for the company.

But note: RedFlow may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.