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 Optical Cable Corporation (NASDAQ:OCC).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At Optical Cable
Chairman Neil Wilkin made the biggest insider sale in the last 12 months. That single transaction was for US$420k worth of shares at a price of US$5.25 each. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of US$5.26. While sellers have a variety of reasons for selling, this isn’t particularly great to see. As a general rule we consider it to be discouraging when insiders are selling below the current price. Please note, however, that this single sale was just 7.3% of Neil Wilkin’s stake.
Over the last year, we note insiders sold 94.53k shares worth US$479k. In total, Optical Cable insiders sold more than they bought over the last year. The average sell price was around US$5.07. It’s not ideal to see that insiders have sold at around the current price. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. The chart below shows insider transactions (by individuals) over the last year. 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 alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It appears that Optical Cable insiders own 35% of the company, worth about US$14m. 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 Does This Data Suggest About Optical Cable Insiders?
It doesn’t really mean much that no insider has traded Optical Cable shares in the last quarter. Still, the insider transactions at Optical Cable in the last 12 months are not very heartening. But it’s good to see that insiders own shares in the company. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
Of course Optical Cable 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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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.