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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 Extended Stay America, Inc. (NASDAQ:STAY).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Extended Stay America
Over the last year, we can see that the biggest insider purchase was by President Bruce Haase for US$513k worth of shares, at about US$10.33 per share. Even though the purchase was made at a significantly lower price than the recent price (US$14.48), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Happily, we note that in the last year insiders paid US$757k for 73.00k shares. On the other hand they divested 28.50k shares, for US$338k. In total, Extended Stay America insiders bought more than they sold over the last year. You can see a visual depiction of insider transactions (by companies and 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!
Extended Stay America is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Extended Stay America Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Extended Stay America shares. In total, Independent Director Richard Wallman sold US$246k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 1.0% of Extended Stay America shares, worth about US$25m. 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 Extended Stay America Insiders?
An insider sold Extended Stay America shares recently, but they didn't buy any. But we take heart from prior transactions. It's good to see insiders are shareholders. So we're happy enough to look past some selling. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example, Extended Stay America has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.
Of course Extended Stay America 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 currently account for open market transactions and private dispositions, but not derivative transactions.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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