We often see insiders buying up shares in companies that perform well over the long term. 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 Founders First Limited (ASX:FFL).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Check out our latest analysis for Founders First
Founders First Insider Transactions Over The Last Year
There wasn't any very large single transaction over the last year, but we can still observe some trading.
Happily, we note that in the last year insiders paid AU$111k for 302.43k shares. But they sold 50.00k shares for AU$12k. In total, Founders First insiders bought more than they sold over the last year. They paid about AU$0.37 on average. These transactions show that insiders have confidence to invest their own money in the stock, albeit at slightly below the recent price of AU$0.40. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Founders First insiders own about AU$11m worth of shares. That equates to 23% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Founders First Insider Transactions Indicate?
The fact that there have been no Founders First insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Founders First and we see no evidence to suggest they are worried about the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. You'd be interested to know, that we found 2 warning signs for Founders First and we suggest you have a look.