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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 shareholders might well want to know whether insiders have been buying or selling shares in Ally Financial Inc. (NYSE:ALLY).
What Is Insider Buying?
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 don't think shareholders should simply follow insider transactions. 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'.
Ally Financial Insider Transactions Over The Last Year
The , Jeffrey Brown, made the biggest insider sale in the last 12 months. That single transaction was for US$2.6m worth of shares at a price of US$27.01 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$29.90. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 13.3% of Jeffrey Brown's holding. Jeffrey Brown was the only individual insider to sell shares in the last twelve months.
Over the last year, we can see that insiders have bought 7000 shares worth US$201k. But insiders sold 97311 shares worth US$2.6m. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Ally Financial better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Ally Financial Have Sold Stock Recently
We've seen more insider selling than insider buying at Ally Financial recently. We note Jeffrey Brown cashed in US$2.6m worth of shares. On the flip side, Director Mayree Clark spent US$149k on purchasing shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Ally Financial insiders own 0.4% of the company, worth about US$42m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Ally Financial Insider Transactions Indicate?
Unfortunately, there has been more insider selling of Ally Financial stock, than buying, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. But since Ally Financial is profitable and growing, we're not too worried by this. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd think twice before buying! 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, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.