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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we'll take a look at whether insiders have been buying or selling shares in Bega Cheese Limited (ASX:BGA).
Do Insider Transactions Matter?
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.
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.'
See our latest analysis for Bega Cheese
Bega Cheese Insider Transactions Over The Last Year
The Non-Executive Director, Jefferson Odgers, made the biggest insider sale in the last 12 months. That single transaction was for AU$594k worth of shares at a price of AU$6.91 each. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is AU$4.24. So it may not shed much light on insider confidence at current levels.
In the last twelve months insiders purchased 5143 shares for AU$30k. But insiders sold 130k shares worth AU$894k. All up, insiders sold more shares in Bega Cheese than they bought, over the last year. They sold for an average price of about AU$6.88. It is certainly not great to see that insiders have sold shares in the company. But the selling was at much higher prices than the current share price (AU$4.24), so it probably doesn't tell us a lot about the value on offer today. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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. It appears that Bega Cheese insiders own 3.8% of the company, worth about AU$34m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.