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 before you buy or sell Steel Dynamics, Inc. (NASDAQ:STLD), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. 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.’
Steel Dynamics Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Executive VP & CFO Theresa Wagler for US$997k worth of shares, at about US$50.30 per share. While the sale doesn’t make us feel confident, we do note it was conducted at a price well above the current share price, which is US$32.00. So it may not tell us anything about how insiders feel about the current share price.
All up, insiders sold more shares in Steel Dynamics than they bought, over the last year. They sold for an average price of about US$49.85. It is certainly not great to see that insiders have sold shares in the company. However, we do note that the average sale price was significantly higher than the current share price (which is US$32.00). You can see a visual depiction of insider transactions over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Steel Dynamics Have Bought Stock Recently
Over the last three months, we’ve seen significantly more insider buying, than insider selling, at Steel Dynamics. Richard Teets spent US$677k on stock. But we did see Senior Vice President of Manufacturing Group Christopher Graham sell shares worth US$514k. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Steel Dynamics insiders own about US$323m worth of shares (which is 4.5% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Steel Dynamics Tell Us?
The recent insider purchase is heartening. But we can’t say the same for the transactions over the last 12 months. Overall, we’d prefer see a more sustained buying from directors, but with a significant insider holding and more recent purchases, Steel Dynamics insiders are reasonably well aligned, and optimistic for the future. Of course, the future is what matters most. So if you are interested in Steel Dynamics, you should check out this free report on analyst forecasts for the company.
But note: Steel Dynamics may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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 email@example.com.