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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 we'll take a look at whether insiders have been buying or selling shares in 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
4D Molecular Therapeutics Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Executive Chairman John Milligan bought US$2.3m worth of shares at a price of US$23.00 per share. We do like to see buying, but this purchase was made at well below the current price of US$32.80. 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.
While 4D Molecular Therapeutics 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 click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
4D Molecular Therapeutics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. 4D Molecular Therapeutics insiders own 16% of the company, currently worth about US$136m based on the recent share price. 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 4D Molecular Therapeutics Tell Us?
It doesn't really mean much that no insider has traded 4D Molecular Therapeutics shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like 4D Molecular Therapeutics insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. You'd be interested to know, that we found 2 warning signs for 4D Molecular Therapeutics and we suggest you have a look.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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