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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 before you buy or sell Brown-Forman Corporation (NYSE:BF.B), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Brown-Forman
In the last twelve months, the biggest single sale by an insider was when the , John Hayes, sold US$100k worth of shares at a price of US$56.51 per share. So we know that an insider sold shares at around the present share price of US$55.75. While we don't usually like to see insider selling, it's more concerning if the sales take price at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).
Over the last year we saw more insider selling of Brown-Forman shares, than buying. 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Brown-Forman Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Brown-Forman. Specifically, John Hayes ditched US$100k 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.
Insider Ownership of Brown-Forman
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. It's great to see that Brown-Forman insiders own 5.8% of the company, worth about US$1.5b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Brown-Forman Insiders?
An insider sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Brown-Forman is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Brown-Forman.
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.