We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Community Health Systems, Inc. (NYSE:CYH).
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.
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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Community Health Systems
Chairman & CEO Wayne Smith made the biggest insider purchase in the last 12 months. That single transaction was for US$3.3m worth of shares at a price of US$3.43 each. That means that an insider was happy to buy shares at above the current price of US$2.82. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months Community Health Systems insiders were buying shares, but not selling. Their average price was about US$2.63. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at Community Health Systems Have Bought Stock Recently
Over the last quarter, Community Health Systems insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought US$2.4m worth of shares. This makes one think the business has some good points.
Insider Ownership of Community Health Systems
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Community Health Systems insiders own about US$20m worth of shares. That equates to 6.1% 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 Does This Data Suggest About Community Health Systems Insiders?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Insiders likely see value in Community Health Systems shares, given these transactions (along with notable insider ownership of the company). Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Community Health Systems.
But note: Community Health Systems 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. 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 email@example.com. 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.