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 Genetic Technologies Limited (ASX:GTG), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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 Genetic Technologies
Over the last year, we can see that the biggest insider purchase was by insider Jimmy Thomas for AU$1.0m worth of shares, at about AU$0.009 per share. That means that even when the share price was higher than AU$0.005 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Jimmy Thomas was the only individual insider to buy shares in the last twelve months. Notably Jimmy Thomas was also the biggest seller.
Jimmy Thomas bought a total of 167.97m shares over the year at an average price of AU$0.0068. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Genetic Technologies is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Genetic Technologies Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Genetic Technologies shares. Specifically, insider Jimmy Thomas ditched AU$72k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Insider Ownership of Genetic Technologies
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 18% of Genetic Technologies shares, worth about AU$4.3m. 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 Genetic Technologies Insider Transactions Indicate?
An insider sold Genetic Technologies shares recently, but they didn't buy any. On the other hand, the insider transactions over the last year are encouraging. And insiders do own shares. So the recent selling doesn't worry us too much. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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