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We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Middlesex Water Company (NASDAQ:MSEX).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Middlesex Water
In the last twelve months, the biggest single sale by an insider was when the Chairman, Dennis Doll, sold US$199k worth of shares at a price of US$49.71 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$59.36. 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. 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. It is worth noting that this sale was only 4% of Dennis Doll's holding.
Over the last year, we note insiders sold 17696 shares worth US$956k. Middlesex Water insiders didn't buy any shares over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Insiders at Middlesex Water Have Sold Stock Recently
The last three months saw significant insider selling at Middlesex Water. Specifically, insiders ditched US$344k 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 Middlesex Water 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. Insiders own 3.7% of Middlesex Water shares, worth about US$36m. 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 Do The Middlesex Water Insider Transactions Indicate?
Insiders haven't bought Middlesex Water stock in the last three months, but there was some selling. And even if we look to the last year, we didn't see any purchases. But since Middlesex Water is profitable and growing, we're not too worried by this. Insiders own shares, but we're still pretty cautious, given the history of sales. So we'd only buy after careful consideration. 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.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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 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.