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 before you buy or sell Severn Trent Plc (LON:SVT), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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’.
Severn Trent Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Managing Director of Business Services Andrew Smith for UK£382k worth of shares, at about UK£20.00 per share. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of UK£20.39. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. It is worth noting that this sale was 65.1% of Andrew Smith’s holding.
We note that in the last year insiders divested 24.10k shares for a total of UK£482k. In total, Severn Trent insiders sold more than they bought over the last year. The average sell price was around UK£19.98. It’s not particularly great to see insiders were selling shares around current prices. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Severn Trent Have Sold Stock Recently
The last quarter saw substantial insider selling of Severn Trent shares. In total, insiders sold UK£482k 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.
Does Severn Trent Boast High 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. A high insider ownership often makes company leadership more mindful of shareholder interests. From our data, it seems that Severn Trent insiders own 0.1% of the company, worth about UK£6.2m. Overall, this level of ownership isn’t that impressive, but it’s certainly better than nothing!
What Might The Insider Transactions At Severn Trent Tell Us?
Insiders sold stock recently, but they haven’t been buying. And even if we look to the last year, we didn’t see any purchases. Insiders own relatively few shares in the company, and when you consider the sales, we’re not particularly excited about the stock. As the saying goes, only fools rush in. Of course, the future is what matters most. So if you are interested in Severn Trent, you should check out this free report on analyst forecasts for the company.
But note: Severn Trent 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.
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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.