The First of Long Island Corporation operates as the holding company for The First National Bank of Long Island that provides financial services to privately owned businesses, professionals, consumers, public bodies, and other organizations. First of Long Island’s insiders have divested from 5.03k shares in the small-cap stock within the past three months. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve assessed two potential reasons behind the insiders’ latest motivation to sell their shares.
Which Insiders Are Selling?
More shares have been sold than bought by First of Long Island’s insiders in the past three months. In total, individual insiders own over 1.12 million shares in the business, which makes up around 4.42% of total shares outstanding.
The insider that recently sold more shares is Mark Curtis (management) .
Is This Consistent With Future Growth?
Analysts’ expectations for earnings over the next 3 years of 5.2% provides a subdued outlook moving forward. Insiders may be more cautious than the market as signalled by their net selling activity.
Probing further into annual growth rates, analysts anticipate a healthy double-digit top-line growth next year, which is expected to drive an earnings growth rate of 10.7%. This indicates some degree of economies of scale which may have a compounding impact in the future.
But this positive outlook is not supported by insiders’ selling activities which may mean they see things differently to the current optimistic situation. Insiders may feel the growth is unsustainable or the market has significantly overvalued the stock.
Did Insiders Sell On Share Price Volatility?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value.
In the past three months, First of Long Island’s share price reached a high of $26.6 and a low of $21.6. This indicates some volatility with a share price change of of 23.15%.
Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal needs.
First of Long Island’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, however, this is rather cautious relative to analysts’ earnings expectation, and the relatively stable stock price may not warrant exploiting any mispricing. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two important aspects you should further examine:
- Financial Health: Does First of Long Island have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of First of Long Island? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.