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 before you buy or sell SECOS Group Limited (ASX:SES), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
The Last 12 Months Of Insider Transactions At SECOS Group
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Donald Haller bought AU$259k worth of shares at a price of AU$0.048 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.13), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
In the last twelve months SECOS Group insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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.
Have SECOS Group Insiders Traded Recently?
We saw some SECOS Group insider buying shares in the last three months. Non-Executive Director David Wake bought AU$10k worth of shares in that time. We like it when there are only buyers, and no sellers. However, in this case the amount invested recently is quite small.
Does SECOS Group Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. SECOS Group insiders own 51% of the company, currently worth about AU$28m 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.
So What Do The SECOS Group Insider Transactions Indicate?
We note a that there has been a bit of insider buying recently (but no selling). The net investment is not enough to encourage us much. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, SECOS Group insiders feel good about the company's future. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. At Simply Wall St, we found 3 warning signs for SECOS Group that deserve your attention before buying any shares.
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.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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