It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell American Financial Group, Inc. (NYSE:AFG), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
American Financial Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Co-President Carl Lindner for US$21m worth of shares, at about US$113 per share. So what is clear is that an insider saw fit to sell at around the current price of US$99.04. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
In total, American Financial Group insiders sold more than they bought over the last year. The sellers received a price of around US$109, on average. We don’t gain confidence from insider selling below the recent share price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
American Financial Group Insiders Are Selling The Stock
We’ve seen more insider selling than insider buying at American Financial Group recently. In total, insiders sold US$10m worth of shares in that time. On the other hand we note Director Gregory Joseph bought US$93k worth of shares, as previously mentioned. Generally this level of net selling might be considered a bit bearish.
Insider Ownership of American Financial Group
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. 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’s great to see that American Financial Group insiders own 21% of the company, worth about US$1.8b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At American Financial Group Tell Us?
The insider sales have outweighed the insider buying, at American Financial Group, in the last three months. Zooming out, the longer term picture doesn’t give us much comfort. But it is good to see that American Financial Group is growing earnings. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn’t make us feel confident about the company. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for American Financial Group.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.