Quite a few insiders have dramatically grown their holdings in Sovereign Cloud Holdings Limited (ASX:SOV) over the past 12 months. An insider's optimism about the company's prospects is a positive sign.

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.

View our latest analysis for Sovereign Cloud Holdings

Sovereign Cloud Holdings Insider Transactions Over The Last Year

In fact, the recent purchase by Catherine Reid was the biggest purchase of Sovereign Cloud Holdings shares made by an insider individual in the last twelve months, according to our records. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.029). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

While Sovereign Cloud Holdings insiders bought shares during the last year, they didn't sell. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

Sovereign Cloud Holdings 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.

Insiders At Sovereign Cloud Holdings Have Bought Stock Recently

Over the last quarter, Sovereign Cloud Holdings insiders have spent a meaningful amount on shares. In total, insiders bought AU$2.4m worth of shares in that time, and we didn't record any sales whatsoever. That shows some optimism about the company's future.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. From our data, it seems that Sovereign Cloud Holdings insiders own 13% of the company, worth about AU$4.8m. Whilst better than nothing, we're not overly impressed by these holdings.

What Might The Insider Transactions At Sovereign Cloud Holdings Tell Us?

It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Sovereign Cloud Holdings insiders are expecting a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 4 warning signs for Sovereign Cloud Holdings (of which 2 are concerning!) you should know about.

Of course Sovereign Cloud Holdings 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 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.