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 BAE Systems plc (LON:BA.).
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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'.
BAE Systems Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chairman Roger Carr bought UK£200k worth of shares at a price of UK£4.93 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being UK£3.97). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Roger Carr was the only individual insider to buy during the last year.
The chart below shows insider transactions (by companies and individuals) over the last year. 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.
Does BAE Systems 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. I reckon it's a good sign if insiders own a significant number of shares in the company. From looking at our data, insiders own UK£2.3m worth of BAE Systems stock, about 0.02% of the company. We prefer to see high levels of insider ownership.
What Might The Insider Transactions At BAE Systems Tell Us?
It doesn't really mean much that no insider has traded BAE Systems shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. The transactions are fine but it'd be more encouraging if BAE Systems insiders bought more shares in the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 2 warning signs with BAE Systems and understanding these should be part of your investment process.
But note: BAE Systems may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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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