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 before you buy or sell Turning Point Therapeutics, Inc. (NASDAQ:TPTX), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Turning Point Therapeutics Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Hongbo Lu for US$1.1m worth of shares, at about US$18.00 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$64.30. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Turning Point Therapeutics insiders may have bought shares in the last year, but they didn't sell any. They paid about US$21.79 on average. It is certainly positive to see that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share 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!
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.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Turning Point Therapeutics insiders own about US$257m worth of shares (which is 11% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Turning Point Therapeutics Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Turning Point Therapeutics shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Turning Point Therapeutics insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. 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.
But note: Turning Point Therapeutics 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 currently account for open market transactions and private dispositions, but not derivative transactions.
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.
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. Thank you for reading.