We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Alarm.com Holdings, Inc. (NASDAQ:ALRM).
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
Alarm.com Holdings Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the , Robert Trudeau, for US$4.6m worth of shares, at about US$56.43 per share. So what is clear is that an insider saw fit to sell at around the current price of US$51.06. 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.
Over the last year, we note insiders sold 454k shares worth US$23m. In the last year Alarm.com Holdings insiders didn't buy any company stock. 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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Alarm.com Holdings Insiders Are Selling The Stock
The last three months saw significant insider selling at Alarm.com Holdings. In total, insiders sold US$357k 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.
Insider Ownership of Alarm.com Holdings
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 3.3% of Alarm.com Holdings shares, worth about US$82m. 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 Alarm.com Holdings Tell Us?
Insiders haven't bought Alarm.com Holdings stock in the last three months, but there was some selling. 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're in no rush to buy! Of course, the future is what matters most. So if you are interested in Alarm.com Holdings, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.