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We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Electrocomponents plc (LON:ECM).
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 on the market. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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.'
Electrocomponents Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the CEO & Director, Lindsley Ruth, sold UK£372k worth of shares at a price of UK£7.45 per share. So what is clear is that an insider saw fit to sell at around the current price of UK£6.21. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign. Lindsley Ruth was the only individual insider to sell over the last year.
Over the last year, we can see that insiders have bought 38000 shares worth UK£197k. But they sold 50000 for UK£372k. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.2% of Electrocomponents shares, worth about UK£5.0m, according to our data. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Does This Data Suggest About Electrocomponents Insiders?
It doesn't really mean much that no insider has traded Electrocomponents shares in the last quarter. Our analysis of Electrocomponents insider transactions leaves us unenthusiastic. And usually insiders own more stock in the company, according to our data. Of course, the future is what matters most. So if you are interested in Electrocomponents, you should check out this free report on analyst forecasts for the company.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.