We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Archer-Daniels-Midland Company (NYSE:ADM).
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, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Archer-Daniels-Midland Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Lead Independent Director Donald Felsinger for US$2.5m worth of shares, at about US$41.80 per share. That means that an insider was happy to buy shares at around the current price of US$46.02. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. Happily, the Archer-Daniels-Midland insiders decided to buy shares at close to current prices.
In the last twelve months insiders purchased 98.51k shares for US$4.1m. But insiders sold 2500 shares worth US$107k. Overall, Archer-Daniels-Midland insiders were net buyers last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Archer-Daniels-Midland 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.
Archer-Daniels-Midland Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Archer-Daniels-Midland shares. In total, Group VP of Finance John Stott dumped US$107k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
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. I reckon it's a good sign if insiders own a significant number of shares in the company. Archer-Daniels-Midland insiders own 0.4% of the company, currently worth about US$110m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Archer-Daniels-Midland Insiders?
An insider hasn't bought Archer-Daniels-Midland stock in the last three months, but there was some selling. But we take heart from prior transactions. And insider ownership remains quite considerable. So we're happy to look past recent trading. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Archer-Daniels-Midland may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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