We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Community West Bancshares (NASDAQ:CWBC).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
Community West Bancshares Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Chairman of the Board William Peeples for US$51k worth of shares, at about US$9.70 per share. That means that even when the share price was higher than US$7.95 (the recent price), an insider wanted to purchase shares. 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. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
While Community West Bancshares insiders bought shares during the last year, they didn't sell. The average buy price was around US$7.84. Although they bought at below the recent share price, it is good to see that insiders are willing to invest in the company. You can see the insider transactions (by companies and 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).
Community West Bancshares Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Community West Bancshares. Overall, four insiders shelled out US$126k for shares in the company -- and none sold. This is a positive in our book as it implies some confidence.
Insider Ownership of Community West Bancshares
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Community West Bancshares insiders own 25% of the company, worth about US$17m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Community West Bancshares Tell Us?
It's certainly positive to see the recent insider purchases. We also take confidence from the longer term picture of insider transactions. Given that insiders also own a fair bit of Community West Bancshares we think they are probably pretty confident of 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 found 3 warning signs for Community West Bancshares that deserve your attention before buying any shares.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
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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