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 before you buy or sell Reed's, Inc. (NASDAQ:REED), you may well want to know whether insiders have been buying or selling.
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.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Reed's
The Corporate Secretary, Judy Reed, made the biggest insider sale in the last 12 months. That single transaction was for US$350k worth of shares at a price of US$2.00 each. So what is clear is that an insider saw fit to sell at around the current price of US$1.96. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
In the last twelve months insiders purchased 159k shares for US$379k. But insiders sold 726k shares worth US$1.9m. In total, Reed's insiders sold more than they bought over the last year. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Reed's better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Reed's Insiders Are Selling The Stock
Over the last three months, we've seen notably more insider selling, than insider buying, at Reed's. In that time, insiders dumped US$845k worth of shares. Meanwhile insiders bought US$203k worth. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the company has been fully valued in recent months.
Insider Ownership of Reed's
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. Insiders own 11% of Reed's shares, worth about US$7.5m, according to our data. We do generally prefer see higher levels of insider ownership.
So What Do The Reed's Insider Transactions Indicate?
Unfortunately, there has been more insider selling of Reed's stock, than buying, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. Insiders own relatively few shares in the company, and when you consider the sales, we're not particularly excited about the stock. We'd certainly think twice before buying! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
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.