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 Covanta Holding Corporation (NYSE:CVA), 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 equally, we would consider it foolish to ignore insider transactions altogether. 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'.
Covanta Holding Insider Transactions Over The Last Year
The Executive VP, Timothy Simpson, made the biggest insider sale in the last 12 months. That single transaction was for US$785k worth of shares at a price of US$17.82 each. That means that an insider was selling shares at around the current price of US$17.42. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).
In total, Covanta Holding insiders sold more than they bought over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Covanta Holding better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Covanta Holding Have Sold Stock Recently
The last three months saw significant insider selling at Covanta Holding. Specifically, insiders ditched US$428k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Insider Ownership of Covanta Holding
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 1.4% of Covanta Holding shares, worth about US$31m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Covanta Holding Insider Transactions Indicate?
Insiders sold stock recently, but they haven't been buying. And our longer term analysis of insider transactions didn't bring confidence, either. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. Of course, the future is what matters most. So if you are interested in Covanta Holding, you should check out this free report on analyst forecasts for the company.
Of course Covanta Holding 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.