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Should You Take Comfort From Insider Transactions At Reed's, Inc. (NASDAQ:REED)?

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Simply Wall St
·4 min read
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We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Reed's, Inc. (NASDAQ:REED), you may well want to know whether insiders have been buying or selling.

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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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'.

Check out our latest analysis for Reed's

Reed's Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Independent Chairman of the Board John Bello bought US$104k worth of shares at a price of US$1.10 per share. That means that an insider was happy to buy shares at around the current price of US$1.19. 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. 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 Reed's insider decided to buy shares at close to current prices. John Bello was the only individual insider to buy shares in the last twelve months.

John Bello bought a total of 264.60k shares over the year at an average price of US$0.75. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
insider-trading-volume

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

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. Our data indicates that Reed's insiders own about US$6.2m worth of shares (which is 6.2% of the company). Whilst better than nothing, we're not overly impressed by these holdings.

What Might The Insider Transactions At Reed's Tell Us?

It doesn't really mean much that no insider has traded Reed's shares in the last quarter. However, our analysis of transactions over the last year is heartening. The transactions are fine but it'd be more encouraging if Reed's insiders bought more shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Reed's. For example, Reed's has 4 warning signs (and 2 which are concerning) we think you should know about.

Of course Reed's 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.

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