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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we'll take a look at whether insiders have been buying or selling shares in Graham Corporation (NYSE:GHM).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
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'.
Graham Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by President James Lines for US$223k worth of shares, at about US$18.37 per share. That means that even when the share price was higher than US$13.84 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Graham insiders may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by companies and 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Have Graham Insiders Traded Recently?
There was some insider buying at Graham over the last quarter. Independent Director Lisa Schnorr shelled out US$10.0k for shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.
Insider Ownership of Graham
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. From our data, it seems that Graham insiders own 4.5% of the company, worth about US$6.2m. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
What Might The Insider Transactions At Graham Tell Us?
We note a that there has been a bit of insider buying recently (but no selling). The net investment is not enough to encourage us much. However, our analysis of transactions over the last year is heartening. We'd like to see bigger individual holdings. However, we don't see anything to make us think Graham insiders are doubting the company. 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. Every company has risks, and we've spotted 1 warning sign for Graham you should know about.
Of course Graham 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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