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 Imperial Brands PLC (LON:IMB), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Imperial Brands Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Alison Cooper bought UK£199k worth of shares at a price of UK£17.73 per share. That means that an insider was happy to buy shares at above the current price of UK£16.42. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We always take careful note of the price insiders pay when purchasing shares. 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.
In the last twelve months Imperial Brands insiders were buying shares, but not selling. 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!
Imperial Brands 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.
Insiders at Imperial Brands Have Bought Stock Recently
It's good to see that Imperial Brands insiders have made notable investments in the company's shares. Overall, five insiders shelled out UK£570k for shares in the company -- and none sold. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Imperial Brands
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Imperial Brands insiders own 0.1% of the company, worth about UK£21m. 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 Does This Data Suggest About Imperial Brands Insiders?
It's certainly positive to see the recent insider purchases. And an analysis of the transactions over the last year also gives us confidence. Insiders likely see value in Imperial Brands shares, given these transactions (along with notable insider ownership of the company). While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 3 warning signs with Imperial Brands and understanding these should be part of your investment process.
Of course Imperial Brands 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.
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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