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 Invitae Corporation (NYSE:NVTA).
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Invitae Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Co-Founder, Sean George, for US$442k worth of shares, at about US$18.21 per share. That means that an insider was selling shares at slightly below the current price (US$24.83). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 7% of Sean George's stake.
Over the last year, we note insiders sold 64708 shares worth US$1.1m. In the last year Invitae insiders didn't buy any company stock. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Invitae Have Sold Stock Recently
The last quarter saw substantial insider selling of Invitae shares. In total, insiders sold US$955k 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 Invitae Boast High Insider Ownership?
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 Invitae insiders own 4.3% of the company, worth about US$101m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Invitae Insiders?
Insiders sold stock recently, but they haven't been buying. And even if we look to the last year, we didn't see any purchases. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. Of course, the future is what matters most. So if you are interested in Invitae, you should check out this free report on analyst forecasts for the company.
But note: Invitae may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.