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 we'll take a look at whether insiders have been buying or selling shares in The Yield Growth Corp. (CNSX:BOSS).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
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The Last 12 Months Of Insider Transactions At Yield Growth
In the last twelve months, the biggest single sale by an insider was when the CEO, President & Director, Penny Green, sold CA$303k worth of shares at a price of CA$0.83 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is CA$0.55. So it may not tell us anything about how insiders feel about the current share price. Penny Green was the only individual insider to sell shares in the last twelve months. Notably Penny Green was also the biggest buyer, having purchased CA$469k worth of shares.
Happily, we note that in the last year insiders paid CA$469k for 1.2m shares. But they sold 682k for CA$535k. Penny Green ditched 682k shares over the year. The average price per share was CA$0.78. 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 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).
Yield Growth Insiders Bought Stock Recently
At Yield Growth,over the last quarter, we have observed quite a lot more insider buying than insider selling. Insiders spent CA$121k on shares. But we did see Penny Green sell shares worth CA$40k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.
Insider Ownership of Yield Growth
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It appears that Yield Growth insiders own 21% of the company, worth about CA$10m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Yield Growth Tell Us?
It is good to see recent purchasing. But we can't say the same for the transactions over the last 12 months. The more recent transactions are a positive, but Yield Growth insiders haven't shown the sustained enthusiasm that we look for, although they do own a decent number of shares, overall. In short they are likely aligned with shareholders. Along with insider transactions, I recommend checking if Yield Growth is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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