We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Royal Mail plc (LON:RMG), you may well want to know whether insiders have been buying or selling.Do Insider Transactions Matter?
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.
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. 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.
See our latest analysis for Royal Mail https://simplywall.st/stocks/gb/transpo ... nt=1123879The Last 12 Months Of Insider Transactions At Royal Mail
Over the last year, we can see that the biggest insider purchase was by Group CEO & Director Rico Back for UK£702k worth of shares, at about UK£2.34 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being UK£1.35). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. 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. Rico Back was the only individual insider to buy over the year.
Rico Back bought 1.05m shares over the last 12 months at an average price of UK£2.05. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
LSE:RMG Recent Insider Trading, March 16th 2020Insider Ownership
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data suggests Royal Mail insiders own 0.2% of the company, worth about UK£2.7m. I generally like to see higher levels of ownership.So What Do The Royal Mail Insider Transactions Indicate?
The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. While the overall levels of insider ownership are below what we’d like to see, the history of transactions imply that Royal Mail insiders are reasonably well aligned, and optimistic for the future. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. Every company has risks, and we’ve spotted 4 warning signs for Royal Mail (of which 1 is a bit concerning!) you should know about.
See the rest of the article here...https://simplywall.st/stocks/gb/transpo ... -shares-3/