Some of the losses seen by insiders who purchased NZ$666k worth of Xero Limited (ASX:XRO) shares over the past year were recovered after the stock increased by 11% over the past week. However, the purchase is proving to be a costly gamble, since losses made by insiders have totalled NZ$172k since the time of purchase.
While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
Check out our latest analysis for Xero
Xero Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Director Brian McAndrews bought AU$333k worth of shares at a price of AU$111 per share. That means that an insider was happy to buy shares at above the current price of AU$82.60. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. The only individual insider to buy over the last year was Brian McAndrews.
Brian McAndrews bought a total of 5.99k shares over the year at an average price of AU$111. 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership Of Xero
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. It's great to see that Xero insiders own 10% of the company, worth about AU$1.2b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Xero Insiders?
The fact that there have been no Xero insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like Xero insiders think the business has merit. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Xero 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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