We often see insiders buying up shares in companies that perform well over the long term. 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 Select Medical Holdings Corporation (NYSE:SEM).
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, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
The Last 12 Months Of Insider Transactions At Select Medical Holdings
Over the last year, we can see that the biggest insider purchase was by Co-Founder & Vice Chairman Rocco Ortenzio for US$4.3m worth of shares, at about US$14.25 per share. So it's clear an insider wanted to buy, at around the current price, which is US$15.85. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. Happily, the Select Medical Holdings insider decided to buy shares at close to current prices. Rocco Ortenzio was the only individual insider to buy shares in the last twelve months.
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!
Select Medical Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Select Medical Holdings Have Sold Stock Recently
The last quarter saw substantial insider selling of Select Medical Holdings shares. In total, VP of Compliance & Audit Services and Corporate Compliance Officer Robert Breighner dumped US$55k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Does Select Medical Holdings Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Select Medical Holdings insiders own about US$432m worth of shares (which is 20% of the company). 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 Select Medical Holdings Tell Us?
An insider sold stock recently, but they haven't been buying. On the other hand, the insider transactions over the last year are encouraging. On top of that, insiders own a significant portion of the company. So we're happy to look past recent trading. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Select Medical Holdings.
Of course Select Medical Holdings may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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 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.