We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in Federal Agricultural Mortgage Corporation (NYSE:AGM).
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, 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 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.’
Federal Agricultural Mortgage Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when Executive VP & Chief Credit Officer John Covington sold US$397k worth of shares at a price of US$90.45 per share. So we know that an insider sold shares at around the present share price of US$82.86. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
Over the last year we saw more insider selling of Federal Agricultural Mortgage shares, than buying. The average sell price was around US$88.61. It’s not particularly great to see insiders were selling shares at below recent prices. But we wouldn’t put too much weight on the insider selling. 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.
Insiders at Federal Agricultural Mortgage Have Sold Stock Recently
Over the last three months, we’ve seen notably more insider selling, than insider buying, at Federal Agricultural Mortgage. We note John Covington cashed in US$133k worth of shares. On the flip side, Thomas Hill spent US$19k on purchasing shares (as mentioned above). Because the selling vastly outweighs the buying, we’d say this is a somewhat bearish sign.
Does Federal Agricultural Mortgage Boast High Insider Ownership?
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 Federal Agricultural Mortgage insiders own 1.7% of the company, worth about US$15m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Federal Agricultural Mortgage Tell Us?
Unfortunately, there has been more insider selling of Federal Agricultural Mortgage stock, than buying, in the last three months. And our longer term analysis of insider transactions didn’t bring confidence, either. But since Federal Agricultural Mortgage is profitable and growing, we’re not too worried by this. While insiders do own shares, they don’t own a heap, and they have been selling. 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 Federal Agricultural Mortgage 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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