We often see insiders buying up shares in companies that perform well over the long term. 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 Lydall, Inc. (NYSE:LDL).
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, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. 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.'
Lydall Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the President of Thermal Acoustical Solutions, Joseph Abbruzzi, sold US$66k worth of shares at a price of US$19.77 per share. That means that an insider was selling shares at around the current price of US$19.52. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
Over the last year, we can see that insiders have bought 9487 shares worth US$51k. On the other hand they divested 5150 shares, for US$108k. All up, insiders sold more shares in Lydall than they bought, over the last year. The sellers received a price of around US$21.05, on average. It's not particularly great to see insiders were selling shares at below recent prices. Since insiders sell for many reasons, we wouldn't put too much weight on it. 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Lydall Insiders Are Selling The Stock
The last three months saw significant insider selling at Lydall. In total, Joseph Abbruzzi sold US$66k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Does Lydall 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Lydall insiders own about US$13m worth of shares. That equates to 3.9% 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 Lydall Insider Transactions Indicate?
An insider sold Lydall shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in Lydall, you should check out this free report on analyst forecasts for the company.
Of course Lydall 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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