Insiders who bought AU$3.35m worth of Medical Developments International Limited (ASX:MVP) stock in the last year recovered part of their losses as the stock rose by 12% last week. The purchase, however, has proven to be a pricey bet, with losses currently totalling AU$956k.
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.
The insider David Williams made the biggest insider purchase in the last 12 months. That single transaction was for AU$3.3m worth of shares at a price of AU$2.07 each. That means that even when the share price was higher than AU$0.67 (the recent price), an insider wanted to purchase shares. 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. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. The only individual insider to buy over the last year was David Williams.
You can see a visual depiction of insider transactions (by companies and 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!
Check out our latest analysis for Medical Developments International
Medical Developments International is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 15% of Medical Developments International shares, worth about AU$11m, according to our data. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
It doesn't really mean much that no insider has traded Medical Developments International shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Medical Developments International and we see no evidence to suggest they are worried about the future. 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. For example, Medical Developments International has 3 warning signs (and 1 which can't be ignored) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.