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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Steel Dynamics, Inc. (NASDAQ:STLD).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
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 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 Steel Dynamics
In the last twelve months, the biggest single purchase by an insider was when Co-Founder & Director Richard Teets bought US$677k worth of shares at a price of US$33.85 per share. That means that even when the share price was higher than US$26.43 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. 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.
Over the last year, we can see that insiders have bought 32740 shares worth US$1.0m. On the other hand they divested 10800 shares, for US$514k. Overall, Steel Dynamics insiders were net buyers last year. You can see the insider transactions (by individuals) over the last year depicted in the chart 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 Steel Dynamics Have Bought Stock Recently
It's good to see that Steel Dynamics insiders have made notable investments in the company's shares. Overall, three insiders shelled out US$336k for shares in the company -- and none sold. This is a positive in our book as it implies some confidence.
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Steel Dynamics insiders own about US$281m worth of shares (which is 4.8% 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.
So What Does This Data Suggest About Steel Dynamics Insiders?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Steel Dynamics. Nice! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Steel Dynamics.
But note: Steel Dynamics 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.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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.