We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Cornerstone Building Brands, Inc. (NYSE:CNR), 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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. 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.'
Cornerstone Building Brands Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board & CEO James Metcalf bought US$709k worth of shares at a price of US$7.09 per share. That means that an insider was happy to buy shares at above the current price of US$4.53. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Happily, we note that in the last year insiders paid US$4.2m for 794k shares. But they sold 24400 for US$152k. Overall, Cornerstone Building Brands insiders were net buyers last year. The average buy price was around US$5.27. I'd consider this a positive as it suggests insiders see value at around the current price. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insiders at Cornerstone Building Brands Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at Cornerstone Building Brands. Not only was there no selling that we can see, but they collectively bought US$2.4m worth of shares. This is a positive in our book as it implies some confidence.
Does Cornerstone Building Brands Boast High Insider Ownership?
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. Cornerstone Building Brands insiders own about US$15m worth of shares. That equates to 2.6% of the company. 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 Does This Data Suggest About Cornerstone Building Brands Insiders?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Cornerstone Building Brands insiders are well aligned, and that they may think the share price is too low. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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. We currently account for open market transactions and private dispositions, but not derivative transactions.
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.