It is usually uneventful when a single insider buys stock. However, When quite a few insiders buy shares, as it happened in Volex plc’s (LON:VLX) case, it’s fantastic news for shareholders.
While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.
The Last 12 Months Of Insider Transactions At Volex
In the last twelve months, the biggest single purchase by an insider was when Executive Chairman Nathaniel Philip Victor Rothschild bought UK£251k worth of shares at a price of UK£4.18 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being UK£2.72). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
While Volex insiders bought shares during the last year, they didn’t sell. The average buy price was around UK£2.73. I’d consider this a positive as it suggests insiders see value at around the current price. The chart below shows insider transactions (by companies and 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!
Volex 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 Volex
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. It’s great to see that Volex insiders own 26% of the company, worth about UK£112m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Volex Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded Volex shares in the last quarter. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Volex insiders think the business has merit. 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 1 warning sign for Volex you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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