We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in NEXT plc ( LON:NXT ).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At NEXT
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Chairman Michael Roney bought UK£249k worth of shares at a price of UK£53.48 per share. So it's clear an insider wanted to buy, at around the current price, which is UK£57.06. 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. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. Happily, the NEXT insiders decided to buy shares at close to current prices.
In the last twelve months insiders paid UK£504k for 10161 shares purchased. NEXT insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
NEXT 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.
Does NEXT Boast High Insider Ownership?
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. It's great to see that NEXT insiders own 1.4% of the company, worth about UK£103m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At NEXT Tell Us?
It doesn't really mean much that no insider has traded NEXT shares in the last quarter. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, NEXT insiders feel good about the company's future. Of course, the future is what matters most . So if you are interested in NEXT, you should check out this free report on analyst forecasts for the company .
But note: NEXT 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.