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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 FMC Corporation (NYSE:FMC).
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 on the market. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
FMC Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Chairman & CEO, Pierre Brondeau, sold US$2.4m worth of shares at a price of US$73.22 per share. That means that even when the share price was below the current price of US$81.81, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 7.7% of Pierre Brondeau's holding.
Over the last year, we can see that insiders have bought 8923 shares worth US$719k. But insiders sold 97092 shares worth US$7.7m. All up, insiders sold more shares in FMC than they bought, over the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like FMC 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 FMC Have Sold Stock Recently
The last three months saw significant insider selling at FMC. In total, insiders sold US$3.8m 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 FMC 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. FMC insiders own about US$75m worth of shares. That equates to 0.7% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The FMC Insider Transactions Indicate?
Insiders sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since FMC is profitable and growing, we're not too worried by this. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! Of course, the future is what matters most. So if you are interested in FMC, 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.
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