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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Avenue Therapeutics, Inc. (NASDAQ:ATXI).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Avenue Therapeutics
The Non-Executive Independent Director Neil Herskowitz made the biggest insider purchase in the last 12 months. That single transaction was for US$93k worth of shares at a price of US$9.31 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$3.22). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Happily, we note that in the last year insiders paid US$152k for 17.15k shares. But insiders sold 3.84k shares worth US$47k. In the last twelve months there was more buying than selling by Avenue Therapeutics insiders. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Avenue Therapeutics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Avenue Therapeutics Insiders Are Selling The Stock
Over the last three months, we've seen a bit of insider selling at Avenue Therapeutics. CFO, Principal Financial Officer & Company Secretary Joseph Vazzano only netted US$47k selling shares, in that period. Neither the lack of buying nor the presence of selling is heartening. But the volume sold is so low that it really doesn't bother us.
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. From looking at our data, insiders own US$2.2m worth of Avenue Therapeutics stock, about 4.1% of the company. We consider this fairly low insider ownership.
So What Do The Avenue Therapeutics Insider Transactions Indicate?
Our data shows a little more insider selling, but no insider buying, in the last three months. But the sales were small, so we're not concerned. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Avenue Therapeutics stock. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Be aware that Avenue Therapeutics is showing 3 warning signs in our investment analysis, and 1 of those can't be ignored...
But note: Avenue Therapeutics may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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