We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Telstra Corporation Limited (ASX:TLS), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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.
The Last 12 Months Of Insider Transactions At Telstra
The CEO, MD & Director, Andrew Penn, made the biggest insider sale in the last 12 months. That single transaction was for AU$972k worth of shares at a price of AU$3.24 each. That means that an insider was selling shares at slightly below the current price (AU$3.52). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 18% of Andrew Penn's holding. Andrew Penn was the only individual insider to sell over the last year.
In the last twelve months insiders purchased 214875 shares for AU$737k. But they sold 300000 for AU$972k. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Telstra Insiders Bought Stock Recently
Over the last quarter, Telstra insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought AU$330k worth of shares. This is a positive in our book as it implies some confidence.
Does Telstra Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Telstra insiders own about AU$17m worth of shares. That equates to 0.04% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Telstra Insider Transactions Indicate?
It's certainly positive to see the recent insider purchases. On the other hand the transaction history, over the last year, isn't so positive. While recent transactions indicate confidence in Telstra, insiders don't own enough of the company to overcome our cautiousness about the longer term transactions. Overall they seem reasonably aligned. 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, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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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.