We often see insiders buying up shares in companies that perform well over the long term. 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 we’ll take a look at whether insiders have been buying or selling shares in Associated British Foods plc (LON:ABF).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
Associated British Foods Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when Finance Director & Executive Director John Bason sold UK£811k worth of shares at a price of UK£27.03 per share. So what is clear is that an insider saw fit to sell at around the current price of UK£22.87. 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. John Bason was the only individual insider to sell over the last year.
Over the last year, we can see that insiders have bought 10.50k shares worth UK£269k. On the other hand they divested 30.00k shares, for UK£811k. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insiders at Associated British Foods Have Bought Stock Recently
Over the last quarter, Associated British Foods insiders have spent a meaningful amount on shares. Specifically, Independent Non-Executive Director Graham Allan bought UK£68k worth of shares in that time, and we didn’t record any sales whatsoever. This could be interpreted as suggesting a positive outlook.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Associated British Foods insiders own 0.6% of the company, currently worth about UK£103m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Associated British Foods Tell Us?
It is good to see recent insider purchase. However, the longer term transactions are not so encouraging. Overall, we’d prefer see a more sustained buying from directors, but with a significant insider holding and more recent purchases, Associated British Foods insiders are reasonably well aligned, and optimistic for the future. 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.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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