We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Ovid Therapeutics Inc. (NASDAQ:OVID).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. 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.'
The Last 12 Months Of Insider Transactions At Ovid Therapeutics
Chairman & CEO Jeremy Levin made the biggest insider purchase in the last 12 months. That single transaction was for US$150k worth of shares at a price of US$2.00 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$1.95). 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 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 bought 100k shares for a total of US$265k. In the last twelve months Ovid Therapeutics insiders were buying shares, but not selling. They paid about US$2.65 on average. 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 individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Ovid Therapeutics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Ovid Therapeutics Have Bought Stock Recently
It's good to see that Ovid Therapeutics insiders have made notable investments in the company's shares. In total, insiders bought US$170k worth of shares in that time, and we didn't record any sales whatsoever. This could be interpreted as suggesting a positive outlook.
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Ovid Therapeutics insiders own about US$20m worth of shares. That equates to 27% 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.
So What Do The Ovid Therapeutics Insider Transactions Indicate?
It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Ovid Therapeutics insiders are well aligned, and that they may think the share price is too low. 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 Ovid Therapeutics may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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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.