We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Elders Limited (ASX:ELD).
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.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Elders
Over the last year, we can see that the biggest insider purchase was by CEO, MD & Executive Director Mark Allison for AU$755k worth of shares, at about AU$5.55 per share. So it's clear an insider wanted to buy, at around the current price, which is AU$6.35. That means they have been optimistic about the company in the past, though they may have changed their mind. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. The good news for Elders share holders is that insiders were buying at near the current price.
While Elders insiders bought shares last year, they didn't sell. You can see the insider transactions (by individuals) over the last year depicted in the chart 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.
Insiders at Elders Have Bought Stock Recently
It's good to see that Elders insiders have made notable investments in the company's shares. CEO, MD & Executive Director Mark Allison spent AU$755k on stock, and there wasn't any selling. This is a positive in our book as it implies some confidence.
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. We usually like to see fairly high levels of insider ownership. Elders insiders own about AU$16m worth of shares. That equates to 1.7% of the company. 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 Elders Insider Transactions Indicate?
It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Insiders likely see value in Elders shares, given these transactions (along with notable insider ownership of the company). If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Elders 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.
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