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 Cathay General Bancorp (NASDAQ:CATY), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
The Last 12 Months Of Insider Transactions At Cathay General Bancorp
In the last twelve months, the biggest single sale by an insider was when the Executive Chairman of the Board, Dunson Cheng, sold US$1.2m worth of shares at a price of US$38.69 per share. So we know that an insider sold shares at around the present share price of US$34.07. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
In total, Cathay General Bancorp insiders sold more than they bought over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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Insiders at Cathay General Bancorp Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Cathay General Bancorp. In total, Executive VP & Chief Risk Officer of Cathay Bank Kim Bingham sold US$123k 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 Cathay General Bancorp Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Cathay General Bancorp insiders own about US$131m worth of shares (which is 4.8% 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 Does This Data Suggest About Cathay General Bancorp Insiders?
An insider sold Cathay General Bancorp shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Cathay General Bancorp is growing earnings. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Cathay General Bancorp.
But note: Cathay General Bancorp 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.
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.