We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Diageo plc (LON:DGE).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
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 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'.
Diageo Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Chairman Javier Ferrán for UK£985k worth of shares, at about UK£32.85 per share. That implies that an insider found the current price of UK£33.33 per share to be enticing. That means they have been optimistic about the company in the past, though they may have changed their mind. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. The good news for Diageo share holders is that an insider was buying at near the current price. Javier Ferrán was the only individual insider to buy over the year.
Javier Ferrán bought a total of 62440 shares over the year at an average price of UK£29.10. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Diageo is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Diageo Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Diageo insiders own 0.1% of the company, worth about UK£89m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Diageo Tell Us?
It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Given that insiders also own a fair bit of Diageo we think they are probably pretty confident of a bright future. Of course, the future is what matters most. So if you are interested in Diageo, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
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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. Thank you for reading.