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 shareholders might well want to know whether insiders have been buying or selling shares in Innospec Inc. (NASDAQ:IOSP).
What Is Insider Selling?
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, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Innospec
The President, Patrick Williams, made the biggest insider sale in the last 12 months. That single transaction was for US$1.2m worth of shares at a price of US$83.57 each. That means that an insider was selling shares at below the current price (US$85.00). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent 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. It is worth noting that this sale was only 4.2% of Patrick Williams's holding.
In the last twelve months insiders netted US$3.3m for 39300 shares sold. Innospec insiders didn't buy any shares over the last year. 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!
I will like Innospec better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Innospec Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Innospec. In total, insiders dumped US$356k 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.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Innospec insiders own about US$46m worth of shares. That equates to 2.2% 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 Does This Data Suggest About Innospec Insiders?
Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. But it is good to see that Innospec is growing earnings. 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.
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.