We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Auto Trader Group plc (LON:AUTO).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. 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 Auto Trader Group
Over the last year, we can see that the biggest insider purchase was by Senior Independent Non-Executive Director David Keens for UK£90k worth of shares, at about UK£3.61 per share. We do like to see buying, but this purchase was made at well below the current price of UK£5.69. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
You can see a visual depiction of insider transactions (by companies and 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!
Auto Trader Group 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.
Does Auto Trader Group Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Auto Trader Group insiders own 1.8% of the company, currently worth about UK£101m 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 Auto Trader Group Insiders?
The fact that there have been no Auto Trader Group insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Auto Trader Group insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. You'd be interested to know, that we found 2 warning signs for Auto Trader Group and we suggest you have a look.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
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