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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Advance Auto Parts, Inc. (NYSE:AAP).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
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.'
Advance Auto Parts Insider Transactions Over The Last Year
Director Nigel Travis made the biggest insider purchase in the last 12 months. That single transaction was for US$200k worth of shares at a price of US$160 each. That means that even when the share price was higher than US$154 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. The only individual insider to buy over the last year was Nigel Travis.
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!
Advance Auto Parts 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.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Advance Auto Parts insiders own 0.4% of the company, worth about US$49m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Advance Auto Parts Insiders?
The fact that there have been no Advance Auto Parts insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think Advance Auto Parts insiders are doubting the company, and they do own shares. Of course, the future is what matters most. So if you are interested in Advance Auto Parts, you should check out this free report on analyst forecasts for the company.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.