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 Foamix Pharmaceuticals Ltd. (NASDAQ:FOMX).
Do Insider Transactions Matter?
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Foamix Pharmaceuticals Insider Transactions Over The Last Year
insider Aharon Schwartz made the biggest insider purchase in the last 12 months. That single transaction was for US$438k worth of shares at a price of US$3.92 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$2.97). Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing 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.
Happily, we note that in the last year insiders paid US$488k for 125640 shares. But they sold 32529 for US$115k. In total, Foamix Pharmaceuticals insiders bought more than they sold over the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Foamix Pharmaceuticals is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Foamix Pharmaceuticals Insiders Are Selling The Stock
We have seen a bit of insider selling at Foamix Pharmaceuticals, over the last three months. Non Executive Director Anna Kazanchyan sold just US$23k worth of shares in that time. It's not great to see insider selling, nor the lack of recent buyers. But the selling simply isn't sufficiently substantial to be of much use as a signal.
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. Insiders own 9.3% of Foamix Pharmaceuticals shares, 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.
So What Do The Foamix Pharmaceuticals Insider Transactions Indicate?
While there has not been any insider buying in the last three months, there has been selling. But given the selling was modest, we're not worried. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Foamix Pharmaceuticals and we see no evidence to suggest they are worried about the future. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
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 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.