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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 WD-40 Company (NASDAQ:WDFC), 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 don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 WD-40
Chief Strategy Officer Michael Freeman made the biggest insider sale in the last 12 months. That single transaction was for US$1.0m worth of shares at a price of US$167 each. That means that even when the share price was below the current price of US$180, an insider wanted to cash in some shares. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. It is worth noting that this sale was only 43.6% of Michael Freeman’s holding.
All up, insiders sold more shares in WD-40 than they bought, over the last year. They sold for an average price of about US$165. We don’t gain confidence from insider selling below the recent share price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at WD-40 Have Sold Stock Recently
The last quarter saw substantial insider selling of WD-40 shares. In total, Michael Freeman dumped US$1.9m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
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. We usually like to see fairly high levels of insider ownership. Insiders own 3.0% of WD-40 shares, worth about US$74m. 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 Does This Data Suggest About WD-40 Insiders?
An insider hasn’t bought WD-40 stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. But since WD-40 is profitable and growing, we’re not too worried by this. While insiders do own shares, they don’t own a heap, and they have been selling. We’re in no rush to buy! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for WD-40.
Of course WD-40 may not be the best stock to buy. So you may wish to see this free collection of high quality 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.