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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 before you buy or sell Standard Diversified Inc. (NYSEMKT:SDI), you may well want to know whether insiders have been buying or selling.
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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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 Standard Diversified
Over the last year, we can see that the biggest insider sale was by the Director, Thomas Helms, for US$792k worth of shares, at about US$20.50 per share. That means that an insider was selling shares at around the current price of US$19.20. While we don't usually like to see insider selling, it's more concerning if the sales take price at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign. Thomas Helms was the only individual insider to sell over 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!
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).
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Standard Diversified insiders own about US$10m worth of shares. That equates to 3.5% 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 Standard Diversified Insiders?
An insider sold Standard Diversified shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
Of course Standard Diversified 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.
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 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.