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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 shareholders might well want to know whether insiders have been buying or selling shares in Core Laboratories N.V. (NYSE:CLB).
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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Core Laboratories Insider Transactions Over The Last Year
The Chairman of the Board Lawrence Bruno made the biggest insider purchase in the last 12 months. That single transaction was for US$105k worth of shares at a price of US$35.00 each. That means that an insider was happy to buy shares at above the current price of US$34.18. 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. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months insiders purchased 3.60k shares for US$115k. On the other hand they divested 4.23k shares, for US$40k. In total, Core Laboratories insiders bought more than they sold over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Core Laboratories 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.
Core Laboratories Insiders Are Selling The Stock
We have seen a bit of insider selling at Core Laboratories, over the last three months. Insiders sold just US$40k worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the selling simply isn't sufficiently substantial to be of much use as a signal.
Insider Ownership of Core Laboratories
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Core Laboratories insiders own about US$29m worth of shares. That equates to 1.9% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Core Laboratories Insider Transactions Indicate?
While there has not been any insider buying in the last three months, there has been selling. But the sales were small, so we're not concerned. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think Core Laboratories insiders are doubting the company, and they do own shares. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Core Laboratories. To help with this, we've discovered 3 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Core Laboratories.
But note: Core Laboratories 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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