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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Babylon Pump & Power Limited (ASX:BPP).
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.'
See our latest analysis for Babylon Pump & Power
The Last 12 Months Of Insider Transactions At Babylon Pump & Power
Over the last year, we can see that the biggest insider purchase was by Geoffrey Lord for AU$85k worth of shares, at about AU$0.018 per share. So it's clear an insider wanted to buy, at around the current price, which is AU$0.02. Of course they may have changed their mind. But this suggests they are optimistic. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the Babylon Pump & Power insiders decided to buy shares at close to current prices.
In the last twelve months insiders paid AU$93k for 5.1m shares purchased. In the last twelve months Babylon Pump & Power insiders were buying shares, but not selling. 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!
Babylon Pump & Power 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.
Insider Ownership
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. Insiders own 28% of Babylon Pump & Power shares, worth about AU$2.1m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.