We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Applied Optoelectronics, Inc. (NASDAQ:AAOI).
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.
We don't think shareholders should simply follow insider transactions. 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'.
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The Last 12 Months Of Insider Transactions At Applied Optoelectronics
In the last twelve months, the biggest single sale by an insider was when the CFO & Chief Strategy Officer, Stefan Murry, sold US$133k worth of shares at a price of US$44.25 per share. While we don't usually like to see insider selling, it's more concerning if the sales take price at a lower price. The good news is that this large sale was at well above current price of US$10.01. So it may not tell us anything about how insiders feel about the current share price.
We note that in the last year insiders divested 4500 shares for a total of US$202k. Applied Optoelectronics insiders didn't buy any shares 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!
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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. Applied Optoelectronics insiders own about US$17m worth of shares. That equates to 8.6% of the company. 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 Applied Optoelectronics Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. Still, the insider transactions at Applied Optoelectronics in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. 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.
Of course Applied Optoelectronics may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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