It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell Aflac Incorporated (NYSE:AFL), you may well want to know whether insiders have been buying or selling.
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, 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 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 Aflac
In the last twelve months, the biggest single sale by an insider was when Chairman & CEO Daniel Amos sold US$2.2m worth of shares at a price of US$44.88 per share. So what is clear is that an insider saw fit to sell at around the current price of US$43.23. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
Happily, we note that in the last year insiders paid US$227k for 5.10k shares. On the other hand they divested 56.07k shares, for US$2.5m. All up, insiders sold more shares in Aflac than they bought, over the last year. The average sell price was around US$44.99. It’s not ideal to see that insiders have sold at around the current price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. The chart below shows insider transactions over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Aflac insiders own 1.1% of the company, currently worth about US$376m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Aflac Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the Aflac insiders selling. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Aflac.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.