It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Aerie Pharmaceuticals, Inc. (NASDAQ:AERI), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
The Last 12 Months Of Insider Transactions At Aerie Pharmaceuticals
Over the last year, we can see that the biggest insider purchase was by CEO & Chairman Vicente Anido for US$499k worth of shares, at about US$19.95 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$18.35). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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 Aerie Pharmaceuticals insiders bought shares last year, they didn't sell. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Aerie Pharmaceuticals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Aerie Pharmaceuticals Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Aerie Pharmaceuticals. Not only was there no selling that we can see, but they collectively bought US$599k worth of shares. This makes one think the business has some good points.
Insider Ownership of Aerie Pharmaceuticals
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. It appears that Aerie Pharmaceuticals insiders own 1.8% of the company, worth about US$16m. 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 Aerie Pharmaceuticals Insiders?
It's certainly positive to see the recent insider purchases. 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. Given that insiders also own a fair bit of Aerie Pharmaceuticals we think they are probably pretty confident of a bright future. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Aerie Pharmaceuticals 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 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.
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