Insiders increase or decrease their holdings for a variety of reasons. They may feel that the company’s stock price will rise in the future or they may be diversifying their investments by moving money into other companies.
Investors can use this activity to gauge whether a company is worth investing in. Some investors look at how much money an insider has invested or sold, but this information alone lacks context. Another approach is to track holding percentages.
For example, two different insiders may have both spent £100,000 on company stock but one increased their holding by 20% and the other by 80%. The 80% is potentially a more bullish signal.
To illustrate the importance of analyzing insider holding percentages, here are some recent examples where insiders increased their holdings by a significant percentage.
London-based shipping company Clarkson PLC (CKN:LN) saw Chairman William Thomas purchase 3,631 shares at £27.40 per share. William Thomas spent around £100,000 on the shares, increasing his holding in the company by 175%. Thomas holds several executive positions in the company, suggesting that he has important information about the company’s future prospects.
Rothschild & Co SCA
Rothschild & Co SCA (ROTH:FP) is one of the world’s largest independent financial advisory groups. Operating in over 40 countries, it provides advisory, wealth and asset management, and merchant banking services to numerous clients. On 31st March 2021, Managing Partner Francois Perol bought 15,000 company shares at €31.15 per share. The insider spent over €470,000 on the purchase, doubling his holding. Perol has previously served in numerous positions in the French Government, including a brief stint as Minister of the Economy, Finance, and Industry in 2002.
Schaltbau Holding AG
Schaltbau Holding AG (SLT:GR) is a German small-cap firm specializing in electrical and mechanical engineering. In the first half of March 2021, CEO Juergen Brandes purchased company stock on three separate occasions and increased his holding by over 164%. CFO Steffen Munz also made three purchases during the period. These purchases increased his company holding by three times from 2,000 shares to over 6,000 shares. Both Brandes and Munz are seasoned industry professionals with decades of experience.
Norwegian Sporting Goods company XXL ASA (XXL:NO) saw strong insider trading in late April. On 23rd April 2021, Chairman Hugo Maurstad bought 500,000 shares at NOK 19.24 per share. The insider invested over NOK 9.6 million on the purchase, increasing his holding by 100%. Maurstard is an experienced industry professional with a background in economics and private equity.
These examples show investors that have spent different sums of money on new stock, however, the change in percentages helps contextualise whether their decision to invest is a bullish signal.There are a range of insider transactions that an investor can focus on and holding percentages is one.