We often see insiders buying up shares in companies that perform well over the long term. 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 First United Corporation (NASDAQ:FUNC), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
First United Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider John McCullough bought US$70k worth of shares at a price of US$11.81 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$11.10). Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
While First United insiders bought shares during the last year, they didn't sell. They paid about US$14.43 on average. These transactions suggest that insiders have considered the current price attractive. 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
First United Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at First United. Overall, eight insiders shelled out US$129k for shares in the company -- and none 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. Based on our data, First United insiders have about 4.8% of the stock, worth approximately US$3.7m. I generally like to see higher levels of ownership.
So What Do The First United Insider Transactions Indicate?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that First United insiders are expecting a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. You'd be interested to know, that we found 3 warning signs for First United and we suggest you have a look.
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.
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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