Multiple insiders secured a larger position in 3i Group plc (LON:III) shares over the last 12 months. This is reassuring as this suggests that insiders have increased optimism about the company’s prospects.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.
In the last twelve months, the biggest single purchase by an insider was when CEO & Executive Director Simon Borrows bought UK£1.0m worth of shares at a price of UK£33.67 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being UK£32.31). 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. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months 3i Group insiders were buying shares, but not selling. 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!
Check out our latest analysis for 3i Group
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.
It’s good to see that 3i Group insiders have made notable investments in the company’s shares. In total, insiders bought UK£3.0m worth of shares in that time, and we didn’t record any sales whatsoever. This makes one think the business has some good points.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. 3i Group insiders own about UK£598m worth of shares (which is 1.9% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. Once you factor in the high insider ownership, it certainly seems like insiders are positive about 3i Group. That’s what I like to see! 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. In terms of investment risks, we’ve identified 1 warning sign with 3i Group and understanding this should be part of your investment process.
But note: 3i 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 of direct interests only, but not derivative transactions or indirect interests.
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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.