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When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase stock, like in Pro-Pac Packaging Limited's (ASX:PPG) instance, it's good news for shareholders.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
View our latest analysis for Pro-Pac Packaging
The Last 12 Months Of Insider Transactions At Pro-Pac Packaging
The Non-Executive Independent Chairman Jonathan Ling made the biggest insider purchase in the last 12 months. That single transaction was for AU$99k worth of shares at a price of AU$0.20 each. That means that an insider was happy to buy shares at above the current price of AU$0.19. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Pro-Pac Packaging insiders may have bought shares in the last year, but they didn't sell any. Their average price was about AU$0.15. To my mind it is good that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. 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!
Pro-Pac Packaging 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
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. From looking at our data, insiders own AU$6.4m worth of Pro-Pac Packaging stock, about 4.1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. I generally like to see higher levels of ownership.
So What Does This Data Suggest About Pro-Pac Packaging Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Pro-Pac Packaging stock. 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. For example, Pro-Pac Packaging has 2 warning signs (and 1 which is potentially serious) we think you should know about.