Have Insiders Been Buying Cogstate Limited (ASX:CGS) Shares This Year?

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 shareholders might well want to know whether insiders have been buying or selling shares in Cogstate Limited (ASX:CGS).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

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'.

View our latest analysis for Cogstate

Cogstate Insider Transactions Over The Last Year

The Non-Executive Director David Dolby made the biggest insider purchase in the last 12 months. That single transaction was for AU$760k worth of shares at a price of AU$0.27 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.65), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.

In the last twelve months insiders purchased 9.61m shares for AU$2.8m. But insiders sold 190.00k shares worth AU$57k. Overall, Cogstate insiders were net buyers during the last year. 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!

Cogstate is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Cogstate insiders own 46% of the company, worth about AU$51m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Cogstate Tell Us?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Cogstate insiders think the business has merit. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For instance, we've identified 4 warning signs for Cogstate (1 is a bit unpleasant) you should be aware of.

But note: Cogstate 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.

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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