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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 we'll take a look at whether insiders have been buying or selling shares in Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. 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'.
The Last 12 Months Of Insider Transactions At Apollo Commercial Real Estate Finance
The Director Eric Press made the biggest insider purchase in the last 12 months. That single transaction was for US$660k worth of shares at a price of US$6.85 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$13.75. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Apollo Commercial Real Estate Finance insiders may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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).
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. It appears that Apollo Commercial Real Estate Finance insiders own 0.6% of the company, worth about US$11m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Apollo Commercial Real Estate Finance Insiders?
It doesn't really mean much that no insider has traded Apollo Commercial Real Estate Finance shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Apollo Commercial Real Estate Finance and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 4 warning signs for Apollo Commercial Real Estate Finance you should be aware of, and 2 of these can't be ignored.
But note: Apollo Commercial Real Estate Finance 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.
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.
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