We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell FAT Brands Inc. (NASDAQ:FAT), you may well want to know whether insiders have been buying or selling.
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 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.'
FAT Brands Insider Transactions Over The Last Year
insider John Junger made the biggest insider purchase in the last 12 months. That single transaction was for US$71k worth of shares at a price of US$5.50 each. That means that an insider was happy to buy shares at above the current price of US$3.90. 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. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Happily, we note that in the last year insiders bought 68507.07 shares for a total of US$392k. FAT Brands insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
FAT Brands 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.
FAT Brands Insiders Bought Stock Recently
It's good to see that FAT Brands insiders have made notable investments in the company's shares. Overall, three insiders shelled out US$79k for shares in the company -- and none sold. This could be interpreted as suggesting a positive outlook.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Based on our data, FAT Brands insiders have about 1.8% of the stock, worth approximately US$838k. We consider this fairly low insider ownership.
What Might The Insider Transactions At FAT Brands Tell Us?
The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. While the overall levels of insider ownership are below what we'd like to see, the history of transactions imply that FAT Brands insiders are reasonably well aligned, and optimistic for the future. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
Of course FAT Brands may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.
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.