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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Alamo Group Inc. (NYSE:ALG).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. 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.'
Alamo Group Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Independent Director, David Grzelak, sold US$783k worth of shares at a price of US$97.82 per share. That means that an insider was selling shares at slightly below the current price (US$109). 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. 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. It is worth noting that this sale was only 50% of David Grzelak's holding.
Over the last year, we can see that insiders have bought 3000 shares worth US$251k. But insiders sold 21139 shares worth US$2.1m. All up, insiders sold more shares in Alamo Group than they bought, over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Alamo Group Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Alamo Group. In total, insiders sold US$450k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does Alamo Group Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 3.2% of Alamo Group shares, worth about US$42m. 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 Alamo Group Insiders?
Insiders sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Alamo Group makes money, and is growing profits. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in Alamo Group, 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.