An Australian developer has released a new app which allows casual investors to receive notifications whenever company directors buy or sell shares in their own company.
StockLight, created by software developer Jason Kotchoff, collates a range of previously difficult to understand information and puts it into a single feed for investors of all levels of experience.
While company directors are required by law to disclose to the Australian Securities Exchange (ASX) whenever they buy or sell shares in their own company, this information is often presented in an obscure way, buried in huge PDF documents in a manner that can be difficult to interpret. For casual investors trying to read the market, this type of information could provide invaluable.
For example, let’s say a company director called Mr X sold $100,000 worth of shares in a company, which represents 20 per cent of his holding. While there could be numerous reasons for Mr X doing this, casual investors may interpret this as signs of the company losing value and use it as part of their decision making process when it comes to buying or selling shares in the company in future.
Mr Kotchoff says, “When a company director has a large insider ownership of a company, you could assume that the success of the company will directly benefit that director. Directors of ASX-listed companies will know more about that company than anybody else, and so you have to assume that when they make decisions to buy into their own companies, in many cases that will be a good sign.”
Mr Kotchoff is quick to point out that he makes no commentary or interpretation in the way the data is presented. Information is gleaned from ASX announcements from Intelligent Investor, then “sanity checked” by a human before being pushed out onto the app as a notification.
Mr Kotchoff adds, “I know personally a number of analysts who look at this information and use it to determine research they provide to their retail investors. At the moment they go through and read every single ASX announcement and make the calculations manually.”
Australian Shareholders’ Association chairman Diana D’Ambra agrees the app could be useful for investors, but errs on the side of caution and suggests it should not be the only source of information that investors base decisions on, “People use it to look for signs. If they’re buying out or selling in, is that a good thing? It’s probably not unhelpful, but there are other ways to get that information. The fundamental difference is pushing it through to the investor, rather than them having to go and read the announcements.”