We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Evans Dixon Limited (ASX:ED1).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
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.
View our latest analysis for Evans Dixon
The Last 12 Months Of Insider Transactions At Evans Dixon
Executive Chairman David Evans made the biggest insider purchase in the last 12 months. That single transaction was for AU$475k worth of shares at a price of AU$0.73 each. That means that even when the share price was higher than AU$0.54 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. David Evans was the only individual insider to buy during the last year.
David Evans bought 1.00m shares over the last 12 months at an average price of AU$0.75. 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!
Evans Dixon 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 of Evans Dixon
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Evans Dixon insiders own about AU$36m worth of shares. That equates to 29% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.