We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Wilmar International Limited (SGX:F34).
What Is Insider Selling?
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.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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 Wilmar International
In fact, the recent purchase by Co-Founder Khoon Kuok was not their only acquisition of Wilmar International shares this year. Earlier in the year, they paid S$4.05 per share in a S$1.6m purchase. That means that an insider was happy to buy shares at above the current price of S$3.18. 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. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Khoon Kuok was the only individual insider to buy shares in the last twelve months.
Khoon Kuok bought a total of 543.10k shares over the year at an average price of S$3.80. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Wilmar International Insiders Bought Stock Recently
Over the last three months, we've seen significantly more insider buying, than insider selling, at Wilmar International. Co-Founder Khoon Kuok spent S$2.1m on stock. But Independent Director Kah-Chye Tay sold shares worth S$432k. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.
Does Wilmar International Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Wilmar International insiders own about S$1.2b worth of shares (which is 6.0% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Wilmar International Insider Transactions Indicate?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest Wilmar International insiders are well aligned, and quite possibly think the share price is too low. Nice! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To that end, you should learn about the 3 warning signs we've spotted with Wilmar International (including 1 which doesn't sit too well with us).
Of course Wilmar International may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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.
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