We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we'll take a look at whether insiders have been buying or selling shares in PennyMac Mortgage Investment Trust (NYSE:PMT).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 PennyMac Mortgage Investment Trust
The Independent Trustee Marianne Sullivan made the biggest insider purchase in the last 12 months. That single transaction was for US$558k worth of shares at a price of US$7.50 each. We do like to see buying, but this purchase was made at well below the current price of US$16.25. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Over the last year, we can see that insiders have bought 189.86k shares worth US$1.3m. But insiders sold 10.73k shares worth US$225k. In the last twelve months there was more buying than selling by PennyMac Mortgage Investment Trust insiders. The chart below shows insider transactions (by companies and 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!
PennyMac Mortgage Investment Trust is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
PennyMac Mortgage Investment Trust Insiders Are Selling The Stock
The last quarter saw substantial insider selling of PennyMac Mortgage Investment Trust shares. In total, Independent Trustee Marianne Sullivan dumped US$66k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. PennyMac Mortgage Investment Trust insiders own about US$32m worth of shares. That equates to 2.0% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The PennyMac Mortgage Investment Trust Insider Transactions Indicate?
An insider sold PennyMac Mortgage Investment Trust shares recently, but they didn't buy any. But we take heart from prior transactions. It's good to see insiders are shareholders. So we're not overly bothered by recent selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 4 warning signs for PennyMac Mortgage Investment Trust (of which 1 doesn't sit too well with us!) you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
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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