It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Colony Capital, Inc. (NYSE:CLNY), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Colony Capital
The President Marc Ganzi made the biggest insider purchase in the last 12 months. That single transaction was for US$270k worth of shares at a price of US$2.70 each. We do like to see buying, but this purchase was made at well below the current price of US$4.81. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
In the last twelve months Colony Capital insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
For a common shareholder, it is worth checking how many shares are held by company 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. Insiders own 2.4% of Colony Capital shares, worth about US$62m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Colony Capital Insider Transactions Indicate?
The fact that there have been no Colony Capital insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Colony Capital and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Colony Capital. In terms of investment risks, we've identified 2 warning signs with Colony Capital and understanding them should be part of your investment process.
But note: Colony Capital may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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