We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Erie Indemnity Company (NASDAQ:ERIE).
What Is Insider Buying?
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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Erie Indemnity Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Director, John Borneman, sold US$1.8m worth of shares at a price of US$177 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$217. 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 20% of John Borneman's holding. John Borneman was the only individual insider to sell over the last year.
In the last twelve months insiders purchased 3581 shares for US$545k. On the other hand they divested 10000 shares, for US$1.8m. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Erie Indemnity Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Erie Indemnity. We can see that Director Elizabeth A. Vorsheck paid US$165k for shares in the company. No-one sold. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Erie Indemnity
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It's great to see that Erie Indemnity insiders own 60% of the company, worth about US$6.0b. 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 Erie Indemnity Tell Us?
The recent insider purchase is heartening. But we can't say the same for the transactions over the last 12 months. The recent buying by an insider, along with high insider ownership, suggest that Erie Indemnity insiders are fairly aligned, and optimistic. Of course, the future is what matters most. So if you are interested in Erie Indemnity, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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 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.