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We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Meritage Homes Corporation (NYSE:MTH), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
Meritage Homes Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the General Counsel, C. White, sold US$879k worth of shares at a price of US$45.07 per share. That means that even when the share price was below the current price of US$55.21, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was 53.4% of C. White's holding.
In total, Meritage Homes insiders sold more than they bought over the last year. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Meritage Homes Insiders Are Selling The Stock
The last three months saw significant insider selling at Meritage Homes. In total, insiders sold US$421k 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.
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. It's great to see that Meritage Homes insiders own 6.2% of the company, worth about US$131m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Meritage Homes Insiders?
Insiders sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Meritage Homes makes money, and is growing profits. 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 Meritage Homes.
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.
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