It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Frequency Electronics, Inc. (NASDAQ:FEIM).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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 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.
The Last 12 Months Of Insider Transactions At Frequency Electronics
The President Stanton Sloane made the biggest insider purchase in the last 12 months. That single transaction was for US$94k worth of shares at a price of US$9.53 each. That means that even when the share price was higher than US$9.18 (the recent price), an insider wanted to purchase shares. 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. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Stanton Sloane was the only individual insider to buy shares in the last twelve months.
The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Frequency Electronics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Frequency Electronics Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Frequency Electronics insiders own about US$12m worth of shares. That equates to 14% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Frequency Electronics Tell Us?
It doesn't really mean much that no insider has traded Frequency Electronics shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Frequency Electronics and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Frequency Electronics. Case in point: We've spotted 3 warning signs for Frequency Electronics you should be aware of, and 1 of them is a bit unpleasant.
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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