We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell CSW Industrials, Inc. (NASDAQ:CSWI), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At CSW Industrials
The Executive VP & CFO James Perry made the biggest insider purchase in the last 12 months. That single transaction was for US$348k worth of shares at a price of US$69.68 each. That means that an insider was happy to buy shares at around the current price of US$75.61. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider purchases were made at close to current prices.
Happily, we note that in the last year insiders paid US$412k for 6.00k shares. On the other hand they divested 700.00 shares, for US$50k. In the last twelve months there was more buying than selling by CSW Industrials insiders. You can see the insider transactions (by companies and 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!
CSW Industrials is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
CSW Industrials Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at CSW Industrials. In total, Senior VP Luke Alverson sold US$50k 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 CSW Industrials
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. It appears that CSW Industrials insiders own 1.7% of the company, worth about US$19m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At CSW Industrials Tell Us?
An insider hasn't bought CSW Industrials stock in the last three months, but there was some selling. But we take heart from prior transactions. We like that insiders own a fair amount of the company. So we're not overly bothered by recent selling. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Every company has risks, and we've spotted 1 warning sign for CSW Industrials you should know about.
Of course CSW Industrials may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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