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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Orion Engineered Carbons S.A. (NYSE:OEC).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. 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'.
The Last 12 Months Of Insider Transactions At Orion Engineered Carbons
In the last twelve months, the biggest single purchase by an insider was when CEO & Director Corning Painter bought US$635k worth of shares at a price of US$12.70 per share. Even though the purchase was made at a significantly lower price than the recent price (US$17.55), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Over the last year, we can see that insiders have bought 174.42k shares worth US$2.0m. On the other hand they divested 4.82k shares, for US$72k. In total, Orion Engineered Carbons insiders bought more than they sold over the last year. They paid about US$11.33 on average. It is certainly positive to see that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Are Orion Engineered Carbons Insiders Buying Or Selling?
In the last three months, insiders sold US$72k. However that only slightly eclipses the US$70k worth of purchases. The net selling is so small that it's hard to draw any conclusions from these recent transactions.
Insider Ownership of Orion Engineered Carbons
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Orion Engineered Carbons insiders own about US$23m worth of shares. That equates to 2.2% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Orion Engineered Carbons Tell Us?
We can't make any useful conclusions about recent trading, since insider buying and selling has been balanced. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Orion Engineered Carbons and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Orion Engineered Carbons has 4 warning signs and it would be unwise to ignore these.
But note: Orion Engineered Carbons 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.
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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