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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 we’ll take a look at whether insiders have been buying or selling shares in Reedy Lagoon Corporation Limited (ASX:RLC).
What Is Insider Buying?
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
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Reedy Lagoon Insider Transactions Over The Last Year
MD, Company Secretary & Director Geoffrey Fethers made the biggest insider purchase in the last 12 months. That single transaction was for AU$584k worth of shares at a price of AU$0.027 each. That means that an insider was happy to buy shares at above the current price. Their view may have changed since then, but at least it shows they felt optimistic at the time. That purchase may suggest an expectation of positive returns over the long term. The only individual insider to buy over the last year was Geoffrey Fethers. Notably Geoffrey Fethers was also the biggest seller, having sold AU$441k worth of shares.
Geoffrey Fethers bought a total of 22.01m shares over the year at an average price of AU$0.027. 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!
I will like Reedy Lagoon better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Reedy Lagoon
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 34% of Reedy Lagoon shares, worth about AU$827k. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.