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 before you buy or sell Sotheby’s (NYSE:BID), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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. 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.’
The Last 12 Months Of Insider Transactions At Sotheby’s
In the last twelve months, the biggest single sale by an insider was when Olivier Reza sold US$3.4m worth of shares at a price of US$52.08 per share. So we know that an insider sold shares at around the present share price of US$39.68. While their view may have changed since the sale, this is not a particularly positive fact. 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 Sotheby’s shares, than buying. They sold for an average price of about US$51.64. It’s not ideal to see that insiders have sold at around the current price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see the insider transactions over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Sotheby’s is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Sotheby’s Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Sotheby’s. We can see that Thomas Smith paid US$625k for shares in the company. No-one sold. This is a positive in our book as it implies some confidence.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Sotheby’s insiders own about US$19m worth of shares (which is 1.0% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Sotheby’s Insider Transactions Indicate?
It’s certainly positive to see the recent insider purchase. But we can’t say the same for the transactions over the last 12 months. The more recent transactions are a positive, but Sotheby’s insiders haven’t shown the sustained enthusiasm that we look for, although they do own a decent number of shares, overall. In short they are likely aligned with shareholders. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Sotheby’s.
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 email@example.com.