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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 Cathay General Bancorp (NASDAQ:CATY).
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.
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. 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.’
Cathay General Bancorp Insider Transactions Over The Last Year
Executive Chairman of the Board Dunson Cheng made the biggest insider sale in the last 12 months. That single transaction was for US$1.2m worth of shares at a price of US$38.69 each. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$40.03. While sellers have a variety of reasons for selling, this isn’t particularly great to see. When an insider sells below the current price, it does tend to make us wonder about the current valuation. It is worth noting that this sale was only 3.9% of Dunson Cheng’s holding.
Over the last year we saw more insider selling of Cathay General Bancorp shares, than buying. The average sell price was around US$41.04. It’s not particularly great to see insiders were selling shares at below recent prices. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Cathay General Bancorp better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Cathay General Bancorp Have Sold Stock Recently
Over the last three months, we’ve seen notably more insider selling, than insider buying, at Cathay General Bancorp. In that time, insiders dumped US$1.2m worth of shares. Meanwhile Director Kelly Chan bought US$19k worth, as we said above. Because the selling vastly outweighs the buying, we’d say this is a somewhat bearish sign.
Does Cathay General Bancorp Boast High Insider Ownership?
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. Cathay General Bancorp insiders own 4.7% of the company, currently worth about US$151m based on the recent share price. 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 Cathay General Bancorp Insiders?
The stark truth for Cathay General Bancorp is that there has been more insider selling than insider buying in the last three months. And our longer term analysis of insider transactions didn’t bring confidence, either. On the plus side, Cathay General Bancorp makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn’t make us feel confident about the company. Of course, the future is what matters most. So if you are interested in Cathay General Bancorp, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.