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Should You Take Comfort From Insider Transactions At Compass Diversified (NYSE:CODI)?

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Simply Wall St
·4 min read
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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 before you buy or sell Compass Diversified (NYSE:CODI), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for Compass Diversified

The Last 12 Months Of Insider Transactions At Compass Diversified

In the last twelve months, the biggest single purchase by an insider was when Independent Chairman of the Board C. Day bought US$120k worth of shares at a price of US$19.61 per share. So it's clear an insider wanted to buy, at around the current price, which is US$22.98. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the Compass Diversified insiders decided to buy shares at close to current prices.

Over the last year, we can see that insiders have bought 54.82k shares worth US$1.0m. But insiders sold 5.56k shares worth US$100k. In total, Compass Diversified insiders bought more than they sold over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
insider-trading-volume

Compass Diversified is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insiders at Compass Diversified Have Bought Stock Recently

It's good to see that Compass Diversified insiders have made notable investments in the company's shares. In total, insiders bought US$717k worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.

Does Compass Diversified Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 2.6% of Compass Diversified shares, worth about US$39m. 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 Compass Diversified Tell Us?

The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Compass Diversified insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 3 warning signs (2 are potentially serious!) that you ought to be aware of before buying any shares in Compass Diversified.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.