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Read This Before Selling E-L Financial Corporation Limited (TSE:ELF) Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell E-L Financial Corporation Limited (TSE:ELF), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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'.

Check out our latest analysis for E-L Financial

The Last 12 Months Of Insider Transactions At E-L Financial

In the last twelve months, the biggest single purchase by an insider was when Independent Director Mark Taylor bought CA$83k worth of shares at a price of CA$555 per share. That implies that an insider found the current price of CA$664 per share to be enticing. That means they have been optimistic about the company in the past, though they may have changed their mind. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the E-L Financial insiders decided to buy shares at close to current prices.

In the last twelve months E-L Financial insiders were buying shares, but not selling. The average buy price was around CA$708. These transactions suggest that insiders have considered the current price attractive. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

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insider-trading-volume

E-L Financial 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.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data indicates that E-L Financial insiders own about CA$8.1m worth of shares (which is 0.3% of the company). We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Whilst better than nothing, we're not overly impressed by these holdings.

So What Do The E-L Financial Insider Transactions Indicate?

It doesn't really mean much that no insider has traded E-L Financial shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. The transactions are fine but it'd be more encouraging if E-L Financial insiders bought more shares in the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with E-L Financial and understanding it should be part of your investment process.

Of course E-L Financial 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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