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 before you buy or sell FutureFuel Corp. (NYSE:FF), 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 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.
FutureFuel Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Executive Vice President, Paul Flynn, for US$285k worth of shares, at about US$14.25 per share. So we know that an insider sold shares at around the present share price of US$12.29. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign. The only individual insider seller over the last year was Paul Flynn.
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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From our data, it seems that FutureFuel insiders own 1.5% of the company, worth about US$8.2m. However, it's possible that insiders might have an indirect interest through a more complex structure. Whilst better than nothing, we're not overly impressed by these holdings.
So What Does This Data Suggest About FutureFuel Insiders?
It doesn't really mean much that no insider has traded FutureFuel shares in the last quarter. Our analysis of FutureFuel insider transactions leaves us unenthusiastic. And we're not picking up on high enough insider ownership to give us any comfort. Along with insider transactions, I recommend checking if FutureFuel is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course FutureFuel 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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.