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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 we'll take a look at whether insiders have been buying or selling shares in Jazz Pharmaceuticals plc (NASDAQ:JAZZ).
Do Insider Transactions Matter?
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 it is perfectly logical to keep tabs on what insiders are doing. 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'.
The Last 12 Months Of Insider Transactions At Jazz Pharmaceuticals
The Independent Director Seamus Mulligan made the biggest insider purchase in the last 12 months. That single transaction was for US$5.6m worth of shares at a price of US$112 each. We do like to see buying, but this purchase was made at well below the current price of US$161. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Jazz Pharmaceuticals Insiders Are Selling The Stock
We have seen a bit of insider selling at Jazz Pharmaceuticals, over the last three months. Insiders sold just US$39k worth of shares in that time. 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.
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Jazz Pharmaceuticals insiders own about US$246m worth of shares (which is 2.7% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Jazz Pharmaceuticals Tell Us?
While there has not been any insider buying in the last three months, there has been selling. But given the selling was modest, we're not worried. But insiders have shown more of an appetite for the stock, over the last year. It would be great to see more insider buying, but overall it seems like Jazz Pharmaceuticals insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 3 warning signs for Jazz Pharmaceuticals you should be aware of.
But note: Jazz Pharmaceuticals 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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