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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we'll take a look at whether insiders have been buying or selling shares in Cortexyme, Inc. (NASDAQ:CRTX).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
Cortexyme Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director David Lamond for US$2.5m worth of shares, at about US$56.42 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$37.10). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Cortexyme insiders may have bought shares in the last year, but they didn't sell any. They paid about US$42.32 on average. This is nice to see since it implies that insiders might see value around current prices. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Insiders at Cortexyme Have Bought Stock Recently
It's good to see that Cortexyme insiders have made notable investments in the company's shares. Independent Director David Lamond spent US$3.5m on stock, and there wasn't any selling. This is a positive in our book as it implies some confidence.
Insider Ownership of Cortexyme
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Cortexyme insiders own 33% of the company, currently worth about US$361m based on the recent share price. 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 Cortexyme Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Cortexyme. One for the watchlist, at least! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Cortexyme. For instance, we've identified 3 warning signs for Cortexyme (1 is significant) you should be aware of.
But note: Cortexyme 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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