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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Good Drinks Australia Ltd (ASX:GDA).
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, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
Good Drinks Australia Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director Robert Gould for AU$200k worth of shares, at about AU$0.05 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.089), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Good Drinks Australia insiders may have bought shares in the last year, but they didn't sell any. 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 always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Good Drinks Australia
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. It appears that Good Drinks Australia insiders own 20% of the company, worth about AU$22m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Good Drinks Australia Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Good Drinks Australia and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Good Drinks Australia (1 doesn't sit too well with us!) and we strongly recommend you look at these before investing.
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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