We often see insiders buying up shares in companies that perform well over the long term. 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 Coats Group plc (LON:COA).
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
See our latest analysis for Coats Group
The Last 12 Months Of Insider Transactions At Coats Group
In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board Michael Clasper bought UK£121k worth of shares at a price of UK£0.60 per share. That means that an insider was happy to buy shares at above the current price of UK£0.55. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Coats Group 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 companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Coats Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Coats Group 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. Based on our data, Coats Group insiders have about 0.3% of the stock, worth approximately UK£2.2m. We prefer to see high levels of insider ownership.
So What Do The Coats Group Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Coats Group shares in the last quarter. However, our analysis of transactions over the last year is heartening. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Coats Group stock. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. While conducting our analysis, we found that Coats Group has 2 warning signs and it would be unwise to ignore these.
But note: Coats Group 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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
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