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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in XBiotech Inc. (NASDAQ:XBIT).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At XBiotech
In the last twelve months, the biggest single purchase by an insider was when Lead Director W. McKenzie bought US$247k worth of shares at a price of US$5.88 per share. Even though the purchase was made at a significantly lower price than the recent price (US$9.50), we still think insider buying is a positive. But because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
W. McKenzie bought 47738 shares over the last 12 months at an average price of US$5.41. You can see the insider transactions (by individuals) over the last year depicted in the chart 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).
Does XBiotech Boast High Insider Ownership?
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. XBiotech insiders own about US$160m worth of shares (which is 47% 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 XBiotech Insiders?
The fact that there have been no XBiotech insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, XBiotech insiders feel good about the company's future. Along with insider transactions, I recommend checking if XBiotech is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: XBiotech 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.
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.