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 before you buy or sell United Therapeutics Corporation (NASDAQ:UTHR), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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.
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. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
The Last 12 Months Of Insider Transactions At United Therapeutics
Over the last year, we can see that the biggest insider sale was by Independent Director Richard Giltner for US$419k worth of shares, at about US$129 per share. That means that an insider was selling shares at around the current price of US$114. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
In the last twelve months insiders netted US$679k for 5.46k shares sold. All up, insiders sold more shares in United Therapeutics than they bought, over the last year. The sellers received a price of around US$124, on average. It’s not particularly great to see insiders were selling shares around current prices. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. 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!
I will like United Therapeutics better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that United Therapeutics insiders own 1.7% of the company, worth about US$84m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At United Therapeutics Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. Our analysis of United Therapeutics insider transactions leaves us cautious. But it’s good to see that insiders own shares in the company. Of course, the future is what matters most. So if you are interested in United Therapeutics, you should check out this free report on analyst forecasts for the company.
Of course United Therapeutics may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.