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 Power Integrations, Inc. (NASDAQ:POWI).
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 don’t think shareholders should simply follow insider transactions. 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.’
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The Last 12 Months Of Insider Transactions At Power Integrations
In the last twelve months, the biggest single sale by an insider was when President Balu Balakrishnan sold US$1.1m worth of shares at a price of US$63.02 per share. That means that even when the share price was below the current price of US$66.40, an insider wanted to cash in some shares. While their view may have changed since they sold, this isn’t a particularly bullish sign. 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 3.4% of Balu Balakrishnan’s stake.
Over the last year, we note insiders sold 105.35k shares worth US$7.3m. All up, insiders sold more shares in Power Integrations than they bought, over the last year. They sold for an average price of about US$68.84. We don’t gain much confidence from insider selling near the recent share price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Power Integrations Have Sold Stock Recently
The last three months saw significant insider selling at Power Integrations. In total, insiders dumped US$67k 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 directors think that the shares are a bargain.
Insider Ownership of Power Integrations
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. Power Integrations insiders own about US$83m worth of shares. That equates to 4.3% 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 Power Integrations Insider Transactions Indicate?
Insiders sold stock recently, but they haven’t been buying. Looking to the last twelve months, our data doesn’t show any insider buying. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’re in no rush to buy! 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 Power Integrations may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.