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 before you buy or sell Po Valley Energy Limited (ASX:PVE), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Po Valley Energy
Non Executive Director Kevin Bailey made the biggest insider purchase in the last 12 months. That single transaction was for AU$304k worth of shares at a price of AU$0.038 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.05), 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.
While Po Valley Energy insiders bought shares last year, they didn't sell. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Po Valley Energy is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Po Valley Energy insiders own 66% of the company, currently worth about AU$21m based on the recent share price. 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 Does This Data Suggest About Po Valley Energy Insiders?
The fact that there have been no Po Valley Energy insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Po Valley Energy insiders feel good about the company's future. Along with insider transactions, I recommend checking if Po Valley Energy is growing revenue. This free chart of historic revenue and earnings should make that easy.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.