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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 shareholders might well want to know whether insiders have been buying or selling shares in Ares Commercial Real Estate Corporation (NYSE:ACRE).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. 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 Ares Commercial Real Estate
The President, James Henderson, made the biggest insider sale in the last 12 months. That single transaction was for US$194k worth of shares at a price of US$14.23 each. That means that even when the share price was below the current price of US$15.03, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 11.2% of James Henderson's holding. James Henderson was the only individual insider to sell over the last year.
Over the last year, we can see that insiders have bought 13030 shares worth US$200k. But they sold 13618 for US$194k. In the last twelve months there was more buying than selling by Ares Commercial Real Estate insiders. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Ares Commercial Real Estate is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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. A high insider ownership often makes company leadership more mindful of shareholder interests. Ares Commercial Real Estate insiders own about US$12m worth of shares. That equates to 2.7% 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 Ares Commercial Real Estate Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Ares Commercial Real Estate and their transactions don't cause us concern. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Ares Commercial Real Estate.
Of course Ares Commercial Real Estate 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.
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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.