Should You Take Comfort From Insider Transactions At MSL Solutions Limited (ASX:MSL)?

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in MSL Solutions Limited (ASX:MSL).

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

View our latest analysis for MSL Solutions

MSL Solutions Insider Transactions Over The Last Year

The Non-Executive Director Richard Holzgrefe made the biggest insider purchase in the last 12 months. That single transaction was for AU$111k worth of shares at a price of AU$0.089 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.063). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. 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.

While MSL Solutions insiders bought shares during the last year, they didn't sell. The average buy price was around AU$0.055. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

MSL Solutions is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insiders at MSL Solutions Have Bought Stock Recently

We saw some MSL Solutions insider buying shares in the last three months. Non-Executive Director Earl Eddings shelled out AU$37k for shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. However, in this case the amount invested recently is quite small.

Does MSL Solutions 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. MSL Solutions insiders own about AU$5.3m worth of shares. That equates to 26% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The MSL Solutions Insider Transactions Indicate?

Our data shows a little insider buying, but no selling, in the last three months. Overall the buying isn't worth writing home about. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in MSL Solutions and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we found 3 warning signs for MSL Solutions that deserve your attention before buying any shares.

Of course MSL Solutions may not be the best stock to buy. So you may wish to see this free collection of high quality 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, 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.

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