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Generally, when a single insider buys stock, it is usually not a big deal. However, when several insiders are buying, like in the case of Smartgroup Corporation Ltd (ASX:SIQ), it sends a favourable message to the company's shareholders.
Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
Check out our latest analysis for Smartgroup
The Last 12 Months Of Insider Transactions At Smartgroup
Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Chairman John Prendiville for AU$584k worth of shares, at about AU$8.34 per share. That means that even when the share price was higher than AU$7.63 (the recent price), an insider wanted to purchase shares. 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. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Happily, we note that in the last year insiders paid AU$902k for 109.14k shares. On the other hand they divested 5.00k shares, for AU$54k. In the last twelve months there was more buying than selling by Smartgroup insiders. The chart below shows insider transactions (by companies and 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!
Smartgroup is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership Of Smartgroup
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Smartgroup insiders own about AU$35m worth of shares. That equates to 3.5% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Smartgroup Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Smartgroup and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Smartgroup. You'd be interested to know, that we found 1 warning sign for Smartgroup and we suggest you have a look.