It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Houston Wire & Cable Company (NASDAQ:HWCC), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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, rules govern insider transactions, and certain disclosures are required.
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'.
Houston Wire & Cable Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director Roy Haley for US$102k worth of shares, at about US$2.04 per share. Even though the purchase was made at a significantly lower price than the recent price (US$2.63), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Houston Wire & Cable insiders may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Houston Wire & Cable is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Houston Wire & Cable
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From our data, it seems that Houston Wire & Cable insiders own 7.5% of the company, worth about US$3.3m. Whilst better than nothing, we're not overly impressed by these holdings.
So What Does This Data Suggest About Houston Wire & Cable Insiders?
It doesn't really mean much that no insider has traded Houston Wire & Cable shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. We'd like to see bigger individual holdings. However, we don't see anything to make us think Houston Wire & Cable insiders are doubting the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Houston Wire & Cable (1 is a bit concerning!) and we strongly recommend you look at these before investing.
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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