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The recent 7.4% drop in CommScope Holding Company, Inc.'s (NASDAQ:COMM) stock could come as a blow to insiders who purchased US$1.7m worth of stock at an average buy price of US$15.15 over the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$1.7m which is not ideal.
Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
CommScope Holding Company Insider Transactions Over The Last Year
In fact, the recent purchase by Claudius Watts was the biggest purchase of CommScope Holding Company shares made by an insider individual in the last twelve months, according to our records. That means that even when the share price was higher than US$14.80 (the recent price), an insider wanted to purchase shares. 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 always take careful note of the price insiders pay when purchasing 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.
While CommScope Holding Company insiders bought shares during the last year, they didn't sell. 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!
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).
CommScope Holding Company Insiders Bought Stock Recently
Over the last quarter, CommScope Holding Company insiders have spent a meaningful amount on shares. Overall, three insiders shelled out US$1.7m for shares in the company -- and none sold. That shows some optimism about the company's future.
Does CommScope Holding Company Boast High 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. CommScope Holding Company insiders own about US$59m worth of shares. That equates to 2.0% 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.
So What Does This Data Suggest About CommScope Holding Company Insiders?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Insiders likely see value in CommScope Holding Company shares, given these transactions (along with notable insider ownership of the company). 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 - CommScope Holding Company has 3 warning signs we think you should be aware of.
Of course CommScope Holding Company 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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