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 shareholders might well want to know whether insiders have been buying or selling shares in TopBuild Corp. (NYSE:BLD).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
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.
The Last 12 Months Of Insider Transactions At TopBuild
Over the last year, we can see that the biggest insider sale was by the President & COO, Robert Buck, for US$659k worth of shares, at about US$59.64 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$110. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 20% of Robert Buck's holding.
Over the last year, we note insiders sold 40405 shares worth US$3.0m. Insiders in TopBuild didn't buy any shares in the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at TopBuild Have Sold Stock Recently
The last three months saw significant insider selling at TopBuild. In total, insiders sold US$850k 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.
Does TopBuild Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that TopBuild insiders own 0.9% of the company, worth about US$34m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At TopBuild Tell Us?
Insiders sold TopBuild shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in TopBuild, you should check out this free report on analyst forecasts for the company.
Of course TopBuild 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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