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 shareholders might well want to know whether insiders have been buying or selling shares in Entergy Corporation (NYSE:ETR).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
Entergy Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when Donald Vinci sold US$672k worth of shares at a price of US$92.12 per share. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of US$93.25. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. As a general rule we consider it to be discouraging when insiders are selling below the current price. We note that the biggest single sale was only 27.9% of Donald Vinci’s holding.
We note that in the last year insiders divested 25.24k shares for a total of US$2.3m. All up, insiders sold more shares in Entergy than they bought, over the last year. The average sell price was around US$89.72. It’s not particularly great to see insiders were selling shares around current prices. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Entergy Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Entergy. In total, insiders dumped US$1.6m 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 directors think that the shares are a bargain.
Insider Ownership of Entergy
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. It appears that Entergy insiders own 0.3% of the company, worth about US$56m. 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 Entergy Insider Transactions Indicate?
Insiders sold stock recently, but they haven’t been buying. And even if we look to the last year, we didn’t see any purchases. On the plus side, Entergy makes money, and is growing profits. Insiders own shares, but we’re still pretty cautious, given the history of sales. We’d think twice before buying! Of course, the future is what matters most. So if you are interested in Entergy, you should check out this free report on analyst forecasts for the company.
Of course Entergy may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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