We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Associated British Foods plc (LON:ABF).
What Is Insider Selling?
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, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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 Associated British Foods
Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Graham Allan for UK£68k worth of shares, at about UK£22.50 per share. That means that even when the share price was higher than UK£21.81 (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 insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
While Associated British Foods 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Associated British Foods Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Associated British Foods. Senior Independent Director Linda Cairnie spent UK£50k on stock, and there wasn't any selling. That shows some optimism about the company's future.
Insider Ownership of Associated British Foods
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Associated British Foods insiders own about UK£98m worth of shares (which is 0.6% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Associated British Foods Tell Us?
We note a that there has been a bit of insider buying recently (but no selling). That said, the purchases were not large. However, our analysis of transactions over the last year is heartening. Insiders own shares in Associated British Foods and we see no evidence to suggest they are worried about the future. Of course, the future is what matters most. So if you are interested in Associated British Foods, you should check out this free report on analyst forecasts for the company.
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.
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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. Thank you for reading.