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It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Element Solutions Inc (NYSE:ESI), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Element Solutions Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Founder & Executive Chairman Martin Ellis Franklin for US$5.8m worth of shares, at about US$11.50 per share. Even though the purchase was made at a significantly lower price than the recent price (US$17.28), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Happily, we note that in the last year insiders paid US$6.5m for 575.50k shares. But they sold 3.00k shares for US$36k. In the last twelve months there was more buying than selling by Element Solutions insiders. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Element Solutions is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Element Solutions
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Element Solutions insiders own about US$311m worth of shares (which is 6.9% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Element Solutions Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like Element Solutions insiders think the business has merit. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Element Solutions. For example - Element Solutions has 1 warning sign we think you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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