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It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell GenMark Diagnostics, Inc. (NASDAQ:GNMK), you may well want to know whether insiders have been buying or selling.
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 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’.
The Last 12 Months Of Insider Transactions At GenMark Diagnostics
Over the last year, we can see that the biggest insider sale was by Jennifer Williams for US$163k worth of shares, at about US$6.90 per share. So we know that an insider sold shares at around the present share price of US$6.01. 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 saw more insider selling of GenMark Diagnostics shares, than buying. They sold for an average price of about US$5.72. We don’t gain confidence from insider selling below the recent share price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at GenMark Diagnostics Have Sold Stock Recently
The last three months saw significant insider selling at GenMark Diagnostics. In total, insiders sold US$333k 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.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. 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 appears that GenMark Diagnostics insiders own 4.6% of the company, worth about US$15m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The GenMark Diagnostics Insider Transactions Indicate?
Insiders sold GenMark Diagnostics shares recently, but they didn’t buy any. Zooming out, the longer term picture doesn’t give us much comfort. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’re in no rush to buy! 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.
But note: GenMark Diagnostics 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.
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 email@example.com.