We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 NMI Holdings, Inc. (NASDAQ:NMIH), you may well want to know whether insiders have been buying or selling.
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 on the market. 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 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.’
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The Last 12 Months Of Insider Transactions At NMI Holdings
Over the last year, we can see that the biggest insider sale was by Executive Chairman Bradley Shuster for US$2.0m worth of shares, at about US$17.16 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$21.76. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. Please note, however, that this single sale was just 15.5% of Bradley Shuster’s stake.
Over the last year, we note insiders sold 306.29k shares worth US$5.7m. In total, NMI Holdings insiders sold more than they bought over the last year. The average sell price was around US$18.61. It’s not ideal to see that insiders have sold at around the current price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. 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!
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Does NMI Holdings Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. NMI Holdings insiders own about US$29m worth of shares. That equates to 2.0% of the company. 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 NMI Holdings Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. Still, the insider transactions at NMI Holdings in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk of the company. Of course, the future is what matters most. So if you are interested in NMI Holdings, you should check out this free report on analyst forecasts for the company.
Of course NMI Holdings may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.