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:
Megaport Ltd (ASX: MP1)
According to a change of director's interest notice, one of this elastic interconnection service provider's non-executive directors has sold a large number of shares recently. The notice reveals that Simon Moore has offloaded 500,000 shares through an off-market sale on June 20. Mr Moore received an average of $6.10 per share, which equates to a total consideration of $3,050,000. This sale has reduced the director's holding by almost a third to 1,122,274 shares. The Megaport share price has been in fine form in 2019, rising over 73% since the turn of the year.
Pacific Smiles Group Ltd (ASX: PSQ)
A change of director's interest notice reveals that this dental centre operator's non-executive director, Dr Alex Abrahams, has sold a significant number of shares this week. According to the notice, Dr Abrahams sold a total of 2 million shares through a series of on-market trades between June 21 and June 25. The director received an average of $1.125 per share, which equates to a total consideration of $2.25 million. However, it is worth noting that Pacific Smiles provided an explanation for the sale. It advised that Dr Abrahams acknowledged the unusual timing of the share sale and has stated that the funds are required to meet an unexpected near-term funding requirement of the Abrahams family. Dr Abrahams still retains an 23.9% interest in the company, which means his interests are firmly aligned with shareholders.
