It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Cal-Maine Foods, Inc. (NASDAQ:CALM).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
The Last 12 Months Of Insider Transactions At Cal-Maine Foods
In the last twelve months, the biggest single sale by an insider was when the Independent Director, James Poole, sold US$107k worth of shares at a price of US$42.76 per share. So what is clear is that an insider saw fit to sell at around the current price of US$40.60. While insider selling is a negative, to us, it is more negative if the shares are sold 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).
All up, insiders sold more shares in Cal-Maine Foods than they bought, over the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Cal-Maine Foods better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Cal-Maine Foods Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Cal-Maine Foods insiders own 12% of the company, worth about US$230m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Cal-Maine Foods Insiders?
The fact that there have been no Cal-Maine Foods insider transactions recently certainly doesn't bother us. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Cal-Maine Foods insider transactions don't fill us with confidence. Of course, the future is what matters most. So if you are interested in Cal-Maine Foods, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.