I like to follow insider trading at companies on the local market although different insider trades provide different levels of practical insights to investors.
For example insider selling can be for a number of reasons (i.e. to buy a house, settle a divorce, pay a tax bill) other than because an insider believes the share price is about to tumble.
Sometimes though insider selling does precede bad news and a cratering share price. It’s just for investors it’s difficult to determine when this each scenario is applicable.
For example footwear retailer Accent Group Ltd (ASX: AX1) has recently seen some heavy insider selling, but the shares have performed well.
While others like IT services business ARQ Group Ltd (ASX: ARQ) saw heavy insider selling just prior to a poor trading update and share price crash.
Therefore, I prefer to focus on insider buying in shares as it leaves less guesswork as nobody buys shares in the expectation that they’ll fall even over the short term.
To be clear I am talking about insider buying “on market”, not via the exercise of options or other related performance grants issued to employees for example.
This is because insider buying “on market’ is the only example where a buyer voluntarily buys shares with their own money.
I rate the insider buying even higher if the insider already owns a large chunk of shares as this suggests even more conviction in their trades.
One business that has seen its CEO and a director buy shares on market recently is Webjet Limited (ASX: WEB).
CEO, John Guscic, bought 35,00 shares on market on September 24/25 for an average price around $11.30 per share. The CEO then added to his already large stake with another 26,500 shares on October 1 at an average price around $10.69 per share.
Mr Guscic is known as a savvy business operator and already held a huge stake in the business plus huge amounts of options exercisable in the future dependent on the share price.
As such he had no real incentive to buy shares other than in the belief they’re undervalued. Another director also bought 3,000 shares on September 26.
Today, Webjet shares are down 3% to a 52-week low of $10 probably in sympathy with news out of Flight Centre Travel Group Ltd (ASX: FLT). It just flagged a soft start to the Australian leisure travel sector over FY 2020 will see H1 FY 2020 profit fall below H1 FY 2019.
Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.
One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…
Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield...
Plus 3 more cheap bets that could position you to profit over the next 12 months!
See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia has recommended Accent Group and Webjet Ltd. 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.