Insiders who purchased US$1.63m worth of Herbalife Ltd. (NYSE:HLF) shares over the past year recouped some of their losses after price gained 12% last week. However, the purchase is proving to be an expensive wager as insiders are yet to get ahead of their losses which currently stand at US$242k since the time of purchase.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

Herbalife Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Chairman & CEO Michael Johnson bought US$498k worth of shares at a price of US$8.07 per share. That means that an insider was happy to buy shares at above the current price of US$7.55. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months Herbalife insiders were buying shares, but not selling. 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!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At Herbalife Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Herbalife. Specifically, insider Juan Mendoza bought US$212k worth of shares in that time, and we didn't record any sales whatsoever. That shows some optimism about the company's future.

Does Herbalife Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Herbalife insiders own 1.5% of the company, worth about US$12m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Herbalife Tell Us?

It's certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. Insiders likely see value in Herbalife shares, given these transactions (along with notable insider ownership of the company). In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Herbalife. Be aware that Herbalife is showing 4 warning signs in our investment analysis, and 2 of those are a bit concerning...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.