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When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase stock, like in Farm Pride Foods Limited's (ASX:FRM) instance, it's good news for shareholders.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
Check out our latest analysis for Farm Pride Foods
The Last 12 Months Of Insider Transactions At Farm Pride Foods
Over the last year, we can see that the biggest insider purchase was by Non-Executive Director Malcolm Ward for AU$100k worth of shares, at about AU$0.10 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.18. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
In the last twelve months insiders purchased 1.06m shares for AU$106k. But insiders sold 1.00m shares worth AU$100k. In total, Farm Pride Foods insiders bought more than they sold over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership Of Farm Pride Foods
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. Farm Pride Foods insiders own about AU$23m worth of shares (which is 57% 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.
So What Do The Farm Pride Foods Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Farm Pride Foods shares in the last quarter. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Farm Pride Foods insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we've found that Farm Pride Foods has 4 warning signs (2 are a bit unpleasant!) that deserve your attention before going any further with your analysis.