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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Applied Optoelectronics, Inc. (NASDAQ:AAOI).
What Is Insider Selling?
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 don't think shareholders should simply follow insider transactions. 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'.
Applied Optoelectronics Insider Transactions Over The Last Year
The Independent Director Che-Wei Lin made the biggest insider purchase in the last 12 months. That single transaction was for US$199k worth of shares at a price of US$7.82 each. That implies that an insider found the current price of US$8.05 per share to be enticing. 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. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. Happily, the Applied Optoelectronics insiders decided to buy shares at close to current prices.
In the last twelve months insiders purchased 35.40k shares for US$289k. But they sold 12.50k shares for US$176k. In the last twelve months there was more buying than selling by Applied Optoelectronics insiders. You can see the insider transactions (by companies and 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!
Applied Optoelectronics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Applied Optoelectronics Insiders Bought Stock Recently
It's good to see that Applied Optoelectronics insiders have made notable investments in the company's shares. Specifically, Independent Director Che-Wei Lin bought US$199k worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.
Insider Ownership of Applied Optoelectronics
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. Our data indicates that Applied Optoelectronics insiders own about US$9.9m worth of shares (which is 4.6% of the company). Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Do The Applied Optoelectronics Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Applied Optoelectronics insiders are expecting a bright future. 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. At Simply Wall St, we've found that Applied Optoelectronics has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.
Of course Applied Optoelectronics 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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