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 Mohawk Group Holdings, Inc. (NASDAQ:MWK).
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
Mohawk Group Holdings Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director William Kurtz for US$100k worth of shares, at about US$5.82 per share. That means that an insider was happy to buy shares at above the current price of US$5.45. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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.
In the last twelve months Mohawk Group Holdings insiders were buying shares, but not selling. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
Mohawk Group Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Mohawk Group Holdings Have Bought Stock Recently
It's good to see that Mohawk Group Holdings insiders have made notable investments in the company's shares. Overall, four insiders shelled out US$230k 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Mohawk Group Holdings insiders own about US$35m worth of shares (which is 42% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Mohawk Group Holdings Insiders?
The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Mohawk Group Holdings. That's what I like to see! 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 4 warning signs for Mohawk Group Holdings and we suggest you have a look.
Of course Mohawk Group Holdings 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.
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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