Insider buying is often regarded as a bullish indicator as few people should know a company better than its own directors.
The theory is that if they have the confidence to buy shares, it could be a sign that things are going well and they expect them to appreciate in value.
Conversely, when directors sell shares it is often regarded as a bearish indicator as you’d be unlikely to sell shares if you felt they were about to increase in value.
With that in mind, here are three shares which have recently experienced notable insider selling:
Brickworks Limited (ASX: BKW)
According to a change of director’s interest notice, this building products supplier’s independent non-executive director, Brendan Crotty, has been selling a large number of shares through an on-market trade this week. Mr Crotty sold 12,000 shares for a total of $214,030 of $17.83 per share, leaving the director with a holding of 14,209 shares. Last week Deutsche Bank downgraded the company’s shares to a hold rating from buy with an $18.60 price target.
Mirvac Group (ASX: MGR)
A change of director’s interest notice reveals that this diversified Australian property group’s CEO and managing director has offloaded shares recently. According to the notice, Susan Lloyd-Hurwitz sold 321,294 stapled securities through a series of on-market trades between March 18 and March 21. The chief executive received approximately $2.73 per stapled security or a total consideration of just under $880,000. Whilst this is a large sale, it is worth noting that Lloyd-Hurwitz still has a considerable holding of 3,260,835 stapled securities and 3,756,771 performance rights.
Ramsay Health Care Limited (ASX: RHC)
This private hospital operator’s CEO and managing director has also been selling shares recently. According to a change of director’s interest notice, Mr Craig McNally sold 45,000 shares on March 25 through an on-market trade. The executive received an average of $64.0482 per share, equating to a total consideration of just under $2.9 million. However, the company advised that the sale was made primarily for the purpose of satisfying his personal income tax obligations. Mr McNally still holds 323,834 Ramsay shares and 187,635 performance rights, though the company has advised that he may sell further shares in order to meet impending tax obligations.
Instead of buying Ramsay I would be picking up the shares of these buy-rated growth shares right now.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Brickworks and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.