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 before you buy or sell Encore Wire Corporation (NASDAQ:WIRE), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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.'
The Last 12 Months Of Insider Transactions At Encore Wire
In fact, the recent sale by Assistant Secretary & Controller Matthew Ford was not their only sale of Encore Wire shares this year. Earlier in the year, they fetched US$59.00 per share in a -US$236.0k sale. That means that even when the share price was slightly below the current price of US$59.98, an insider wanted to cash in some shares. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just 26.7% of Matthew Ford's stake.
Matthew Ford sold a total of 7000 shares over the year at an average price of US$59.43. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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Insider Ownership of Encore Wire
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Encore Wire insiders own about US$44m worth of shares. That equates to 3.5% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Encore Wire Insider Transactions Indicate?
An insider sold Encore Wire shares recently, but they didn't buy any. And even if we look to the last year, we didn't see any purchases. But it is good to see that Encore Wire is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd think twice before buying! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Encore Wire.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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.