It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Standard Motor Products, Inc. (NYSE:SMP), 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, 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Standard Motor Products Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Executive Chairman, Lawrence Sills, for US$625k worth of shares, at about US$46.42 per share. That means that even when the share price was below the current price of US$50.33, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 2% of Lawrence Sills's holding.
Over the last year, we note insiders sold 35192 shares worth US$1.6m. In the last year Standard Motor Products insiders didn't buy any company stock. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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Standard Motor Products Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Standard Motor Products. In total, Vice President of Human Resources Thomas Tesoro sold US$310k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Standard Motor Products Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Standard Motor Products insiders own about US$109m worth of shares (which is 9.7% 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.
So What Do The Standard Motor Products Insider Transactions Indicate?
An insider hasn't bought Standard Motor Products stock in the last three months, but there was some selling. And even if we look to the last year, we didn't see any purchases. But it is good to see that Standard Motor Products is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. Of course, the future is what matters most. So if you are interested in Standard Motor Products, you should check out this free report on analyst forecasts for the company.
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.
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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.