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 before you buy or sell Guaranty Federal Bancshares, Inc. (NASDAQ:GFED), you may well want to know whether insiders have been buying or selling.
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 don't think shareholders should simply follow insider transactions. 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'.
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The Last 12 Months Of Insider Transactions At Guaranty Federal Bancshares
Director John Griesemer made the biggest insider purchase in the last 12 months. That single transaction was for US$117k worth of shares at a price of US$23.88 each. That means that an insider was happy to buy shares at above the current price of US$22.66. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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.
In the last twelve months insiders paid US$129k for 5500 shares purchased. In the last twelve months Guaranty Federal Bancshares insiders were buying shares, but not selling. 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!
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 Guaranty Federal Bancshares Have Bought Stock Recently
Over the last quarter, Guaranty Federal Bancshares insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought US$129k worth of shares. This is a positive in our book as it implies some confidence.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data indicates that Guaranty Federal Bancshares insiders own about US$9.2m worth of shares (which is 9.1% of the company). We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Guaranty Federal Bancshares Insiders?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Guaranty Federal Bancshares insiders are expecting a bright future. Of course, the future is what matters most. So if you are interested in Guaranty Federal Bancshares, you should check out this free report on analyst forecasts for the company.
But note: Guaranty Federal Bancshares 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.
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.