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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 we'll take a look at whether insiders have been buying or selling shares in The Howard Hughes Corporation (NYSE:HHC).
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.
We don't think shareholders should simply follow insider transactions. 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'.
Howard Hughes Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director Mary Tighe for US$500k worth of shares, at about US$49.48 per share. So it's clear an insider wanted to buy, at around the current price, which is US$53.92. That means they have been optimistic about the company in the past, though they may have changed their mind. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. In this case we're pleased to report that the insider purchases were made at close to current prices.
Happily, we note that in the last year insiders paid US$2.4m for 31.35k shares. On the other hand they divested 500.00 shares, for US$63k. In total, Howard Hughes insiders bought more than they sold over the last year. The average buy price was around US$77.68. I'd consider this a positive as it suggests insiders see value at around the current price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Howard Hughes is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Howard Hughes
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. Howard Hughes insiders own 3.7% of the company, currently worth about US$107m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Howard Hughes Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Howard Hughes insiders feel good about the company's future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 2 warning signs for Howard Hughes (of which 1 shouldn't be ignored!) you should know about.
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.
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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