- Oops!Something went wrong.Please try again later.
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 we'll take a look at whether insiders have been buying or selling shares in Uscom Limited (ASX:UCM).
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 don't think shareholders should simply follow insider transactions. 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'.
The Last 12 Months Of Insider Transactions At Uscom
Notably, that recent purchase by Xianhui Meng is the biggest insider purchase of Uscom shares that we've seen in the last year. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.18. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
While Uscom insiders bought shares during the last year, they didn't sell. 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!
Uscom is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Uscom Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Uscom. Non-Executive Director Xianhui Meng spent AU$220k on stock, and there wasn't any selling. This is a positive in our book as it implies some confidence.
Does Uscom Boast High Insider Ownership?
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. It's great to see that Uscom insiders own 52% of the company, worth about AU$14m. 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 Uscom Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss during the last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Uscom insiders are well aligned, and quite possibly think the share price is too low. Looks promising! 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. Every company has risks, and we've spotted 4 warning signs for Uscom you should know about.
But note: Uscom 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.