It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Freehold Royalties Ltd. ( TSE:FRU ), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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. 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'.
The Last 12 Months Of Insider Transactions At Freehold Royalties
Chair of the Board Marvin Romanow made the biggest insider purchase in the last 12 months. That single transaction was for CA$265k worth of shares at a price of CA$8.82 each. That means that an insider was happy to buy shares at above the current price of CA$7.24. 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. 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.
In the last twelve months insiders paid CA$684k for 72866 shares purchased. In the last twelve months Freehold Royalties insiders were buying shares, but not selling. 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at Freehold Royalties Have Bought Stock Recently
There was some insider buying at Freehold Royalties over the last quarter. insider Robert Lamond bought CA$30k worth of shares in that time. It's great to see that insiders are only buying, not selling. However, in this case the amount invested recently is quite small.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From looking at our data, insiders own CA$1.9m worth of Freehold Royalties stock, about 0.2% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. We consider this fairly low insider ownership.
So What Do The Freehold Royalties Insider Transactions Indicate?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. Overall the buying isn't worth writing home about. On a brighter note, the transactions over the last year are encouraging. We'd like to see bigger individual holdings. However, we don't see anything to make us think Freehold Royalties insiders are doubting the company. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future .
But note: Freehold Royalties may not be the best stock to buy . So take a peek at this free list of interesting companies with high ROE and low debt.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org . This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.