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It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Lululemon Athletica Inc. (NASDAQ:LULU).
What Is Insider Buying?
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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Lululemon Athletica
Over the last year, we can see that the biggest insider purchase was by Independent Director Martha A. Morfitt for US$1.6m worth of shares, at about US$330 per share. So it's clear an insider wanted to buy, at around the current price, which is US$365. 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 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 bought shares at close to current prices. The only individual insider to buy over the last year was Martha A. Morfitt.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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 Lululemon Athletica Have Bought Stock Recently
There has been significantly more insider buying, than selling, at Lululemon Athletica, over the last three months. In total, Independent Director Martha A. Morfitt bought US$1.6m worth of shares in that time. But we did see Independent Director Kathryn Henry sell shares worth US$260k. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Lululemon Athletica insiders own about US$1.9b worth of shares (which is 4.0% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Lululemon Athletica Tell Us?
The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. When combined with notable insider ownership, these factors suggest Lululemon Athletica insiders are well aligned, and quite possibly think the share price is too low. Looks promising! Therefore, you should definitely take a look at this FREE report showing analyst forecasts for Lululemon Athletica.
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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