We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Aerometrex Limited (ASX:AMX).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Aerometrex
In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Chairman Mark Lindh bought AU$100k worth of shares at a price of AU$2.13 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$1.31). It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
While Aerometrex insiders bought shares during the last year, they didn't sell. The average buy price was around AU$1.78. I'd consider this a positive as it suggests insiders see value at around the current price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
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.
Insider Ownership of Aerometrex
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Aerometrex insiders own 52% of the company, currently worth about AU$63m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Aerometrex Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Aerometrex shares in the last quarter. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Aerometrex insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the 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. When we did our research, we found 4 warning signs for Aerometrex (1 makes us a bit uncomfortable!) that we believe deserve your full attention.
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.
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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