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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 Lululemon Athletica Inc. (NASDAQ:LULU).
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 on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Lululemon Athletica
The COO & Executive VP of International, Stuart Haselden, made the biggest insider sale in the last 12 months. That single transaction was for US$1.6m worth of shares at a price of US$165 each. That means that an insider was selling shares at slightly below the current price (US$175). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was 92.2% of Stuart Haselden's holding.
We note that in the last year insiders divested 30355 shares for a total of US$5.0m. Insiders in Lululemon Athletica didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Lululemon Athletica Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Lululemon Athletica. In total, insiders dumped US$5.0m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does Lululemon Athletica Boast High Insider Ownership?
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. We usually like to see fairly high levels of insider ownership. Lululemon Athletica insiders own about US$74m worth of shares. That equates to 0.3% 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 Lululemon Athletica Insiders?
Insiders sold stock recently, but they haven't been buying. And even if we look to the last year, we didn't see any purchases. But since Lululemon Athletica is profitable and growing, we're not too worried by this. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd think twice before buying! 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, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.