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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. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Aramark (NYSE:ARMK).
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.
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'.
The Last 12 Months Of Insider Transactions At Aramark
In the last twelve months, the biggest single purchase by an insider was when Executive VP & CFO Thomas Ondrof bought US$250k worth of shares at a price of US$24.99 per share. Even though the purchase was made at a significantly lower price than the recent price (US$38.35), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Aramark 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.
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. We usually like to see fairly high levels of insider ownership. Insiders own 0.4% of Aramark shares, worth about US$41m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Aramark Tell Us?
The fact that there have been no Aramark 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 Aramark insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example - Aramark has 1 warning sign we think you should be aware of.
Of course Aramark may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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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