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 before you buy or sell CV Check Ltd (ASX:CV1), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
CV Check Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Bernard Stephens bought AU$1.2m worth of shares at a price of AU$0.12 per share. We do like to see buying, but this purchase was made at well below the current price of AU$0.18. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Happily, we note that in the last year insiders bought 15.0m shares for a total of AU$1.8m. CV Check 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 individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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.
CV Check Insiders Bought Stock Recently
Over the last quarter, CV Check insiders have spent a meaningful amount on shares. We can see that Bernard Stephens paid AU$504k for shares in the company. No-one sold. This is a positive in our book as it implies some confidence.
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 36% of CV Check shares, worth about AU$17m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The CV Check Insider Transactions Indicate?
It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of CV Check we think they are probably pretty confident of a bright future. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
Of course CV Check may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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