We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Summit Hotel Properties, Inc. (NYSE:INN).
Do Insider Transactions Matter?
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, rules govern insider transactions, and certain disclosures are required.
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.
The Last 12 Months Of Insider Transactions At Summit Hotel Properties
Over the last year, we can see that the biggest insider sale was by the Executive VP & COO, Craig Aniszewski, for US$464k worth of shares, at about US$11.60 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$12.13. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 9.1% of Craig Aniszewski's stake. Craig Aniszewski was the only individual insider to sell over the last year.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. 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 that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Summit Hotel Properties Have Sold Stock Recently
The last quarter saw substantial insider selling of Summit Hotel Properties shares. In total, Executive VP & COO Craig Aniszewski sold US$464k 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.
Insider Ownership of Summit Hotel Properties
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. Insiders own 2.1% of Summit Hotel Properties shares, worth about US$27m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Summit Hotel Properties Insider Transactions Indicate?
An insider sold Summit Hotel Properties shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Summit Hotel Properties is profitable and growing, we're not too worried by this. While insiders do own shares, they don't own a heap, and they have been selling. 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.
But note: Summit Hotel Properties 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.
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