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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 shareholders might well want to know whether insiders have been buying or selling shares in Brady Corporation (NYSE:BRC).
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.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Brady Insider Transactions Over The Last Year
The Director, Elizabeth Bruno, made the biggest insider sale in the last 12 months. That single transaction was for US$1.1m worth of shares at a price of US$43.86 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$47.99. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower 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. We note that the biggest single sale was only 2% of Elizabeth Bruno's holding.
In the last twelve months insiders netted US$2.5m for 54619 shares sold. Insiders in Brady didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. 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.
Brady Insiders Are Selling The Stock
The last three months saw significant insider selling at Brady. In total, President J. Nauman sold US$881k 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.
Does Brady Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Brady insiders own 9.6% of the company, worth about US$243m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Brady Tell Us?
An insider sold Brady shares recently, but they didn't buy any. And even if we look to the last year, we didn't see any purchases. But since Brady is profitable and growing, we're not too worried by this. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Brady.
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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.