We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Churchill Downs Incorporated (NASDAQ:CHDN), you may well want to know whether insiders have been buying or selling.
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 on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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.'
Churchill Downs Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Richard Duchossois for US$1.5m worth of shares, at about US$91.86 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$118. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Over the last year, we can see that insiders have bought 39600 shares worth US$3.5m. While Churchill Downs insiders bought shares last year, they didn't sell. 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!
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.
Insiders at Churchill Downs Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at Churchill Downs. Specifically, Chairman of the Board R. Rankin bought US$51k worth of shares in that time, and we didn't record any sales whatsoever. That shows some optimism about the company's future.
Does Churchill Downs Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Churchill Downs insiders own 3.8% of the company, currently worth about US$175m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Churchill Downs Insider Transactions Indicate?
The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. When combined with notable insider ownership, these factors suggest Churchill Downs insiders are well aligned, and quite possibly think the share price is too low. Looks promising! Of course, the future is what matters most. So if you are interested in Churchill Downs, you should check out this free report on analyst forecasts for the company.
But note: Churchill Downs may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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.