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 Mercantile Bank Corporation (NASDAQ:MBWM).
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 it is perfectly logical to keep tabs on what insiders are doing. 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.’
Mercantile Bank Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when Director Thomas Sullivan sold US$238k worth of shares at a price of US$34.70 per share. That means that an insider was selling shares at around the current price of US$28.99. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
Over the last year, we note insiders sold 10.93k shares worth US$378k. All up, insiders sold more shares in Mercantile Bank than they bought, over the last year. They sold for an average price of about US$34.57. It’s not particularly great to see insiders were selling shares around current prices. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. The chart below shows insider transactions 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!
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Mercantile Bank Insiders Are Selling The Stock
The last three months saw some Mercantile Bank insider selling. Senior VP & Human Resource Director Lonna Wiersma only netted US$31k selling shares, in that period. It’s not great to see insider selling, nor the lack of recent buyers. But the selling simply isn’t sufficiently substantial to be of much use as a signal.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Mercantile Bank insiders own about US$16m worth of shares (which is 3.5% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Mercantile Bank Insider Transactions Indicate?
We note a that there’s been a little more insider selling than buying, recently. But the difference isn’t enough to have us worried. Recent sales exacerbate our caution arising from analysis of Mercantile Bank insider transactions. But we do like the fact that insiders own a fair chunk of the company. 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.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.