It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Sabra Health Care REIT, Inc. (NASDAQ:SBRA), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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 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.'
The Last 12 Months Of Insider Transactions At Sabra Health Care REIT
Over the last year, we can see that the biggest insider sale was by the Director, Raymond Lewis, for US$1.2m worth of shares, at about US$21.47 per share. That means that even when the share price was below the current price of US$22.20, 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 24% of Raymond Lewis's stake.
In the last twelve months insiders netted US$1.6m for 73000 shares sold. In the last year Sabra Health Care REIT 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!
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Sabra Health Care REIT Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Sabra Health Care REIT. In total, insiders sold US$1.6m 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 Sabra Health Care REIT 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Sabra Health Care REIT insiders own about US$50m worth of shares. That equates to 1.2% of the company. 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 Sabra Health Care REIT Insiders?
Insiders haven't bought Sabra Health Care REIT stock in the last three months, but there was some selling. And even if we look to the last year, we didn't see any purchases. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in Sabra Health Care REIT, you should check out this free report on analyst forecasts for the company.
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.