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Should You Take Comfort From Insider Transactions At Universal Insurance Holdings, Inc. (NYSE:UVE)?

Simply Wall St

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 we'll take a look at whether insiders have been buying or selling shares in Universal Insurance Holdings, Inc. (NYSE:UVE).

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Universal Insurance Holdings

Universal Insurance Holdings Insider Transactions Over The Last Year

Chief Executive Officer Stephen Donaghy made the biggest insider purchase in the last 12 months. That single transaction was for US$630k worth of shares at a price of US$31.50 each. That means that even when the share price was higher than US$26.50 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

Universal Insurance Holdings insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

NYSE:UVE Recent Insider Trading, January 17th 2020

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.

Universal Insurance Holdings Insiders Bought Stock Recently

Over the last quarter, Universal Insurance Holdings insiders have spent a meaningful amount on shares. In total, insiders bought US$1.2m worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.

Insider Ownership of Universal Insurance Holdings

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Insiders own 9.0% of Universal Insurance Holdings shares, worth about US$79m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About Universal Insurance Holdings Insiders?

The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. Insiders likely see value in Universal Insurance Holdings shares, given these transactions (along with notable insider ownership of the company). Of course, the future is what matters most. So if you are interested in Universal Insurance Holdings, you should check out this free report on analyst forecasts for the company.

But note: Universal Insurance Holdings 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.