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 we’ll take a look at whether insiders have been buying or selling shares in A. O. Smith Corporation (NYSE:AOS).
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, 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 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.’
The Last 12 Months Of Insider Transactions At A. O. Smith
In the last twelve months, the biggest single sale by an insider was when Wilfridus Brouwer sold US$1.9m worth of shares at a price of US$63.11 per share. Although we don’t gain confidence from insider selling, we note that this large sale was at well above current price of US$44.91. So it may not shed much light on insider confidence at current levels.
Over the last year, we note insiders sold 139.00k shares worth US$8.8m. In total, A. O. Smith insiders sold more than they bought over the last year. The average sell price was around US$63.37. It is certainly not great to see that insiders have sold shares in the company. But the selling was at much higher prices than the current share price (US$44.91), so it probably doesn’t tell us a lot about the value on offer today. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like A. O. Smith 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 A. O. Smith Have Sold Stock Recently
The last three months saw significant insider selling at A. O. Smith. In total, Director Paul Jones sold US$414k 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.
Insider Ownership of A. O. Smith
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it’s a good sign if insiders own a significant number of shares in the company. A. O. Smith insiders own about US$91m worth of shares. That equates to 1.2% of the company. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Do The A. O. Smith Insider Transactions Indicate?
An insider sold stock recently, but they haven’t been buying. And even if we look to the last year, we didn’t see any purchases. While insiders do own shares, they don’t own a heap, and they have been selling. We’d think twice before buying! Of course, the future is what matters most. So if you are interested in A. O. Smith, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity 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 firstname.lastname@example.org.