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 shareholders might well want to know whether insiders have been buying or selling shares in Home Bancorp, Inc. (NASDAQ:HBCP).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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 Home Bancorp
The President, John Bordelon, made the biggest insider sale in the last 12 months. That single transaction was for US$232k worth of shares at a price of US$35.84 each. That means that even when the share price was below the current price of US$38.26, an insider wanted to cash in some shares. 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. 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. This single sale was just 3.6% of John Bordelon's stake.
In the last twelve months insiders purchased 4000 shares for US$152k. But they sold 33663 for US$1.2m. Over the last year we saw more insider selling of Home Bancorp shares, than buying. The average sell price was around US$36.13. We don't gain confidence from insider selling below the recent share price. Since insiders sell for many reasons, we wouldn't put too much weight on it. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Home Bancorp Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Home Bancorp. Specifically, Executive VP & CFO Joseph Zanco ditched US$226k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Insider Ownership of Home Bancorp
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 12% of Home Bancorp shares, worth about US$44m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Home Bancorp Insider Transactions Indicate?
An insider sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Home Bancorp is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. 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 Home Bancorp may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.
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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.