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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 shareholders might well want to know whether insiders have been buying or selling shares in VIP Gloves Limited (ASX:VIP).
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.
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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
View our latest analysis for VIP Gloves
VIP Gloves Insider Transactions Over The Last Year
While there weren't any large insider transactions in the last twelve months, it's still worth looking at the trading.
The chart below shows insider transactions (by 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!
VIP Gloves is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. VIP Gloves insiders own about AU$7.2m worth of shares. That equates to 38% 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.
What Might The Insider Transactions At VIP Gloves Tell Us?
It's certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. Insiders likely see value in VIP Gloves shares, given these transactions (along with notable insider ownership of the company). So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Be aware that VIP Gloves is showing 5 warning signs in our investment analysis, and 2 of those are significant...