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 we'll take a look at whether insiders have been buying or selling shares in KEMET Corporation (NYSE:KEM).
What Is Insider Buying?
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
KEMET Insider Transactions Over The Last Year
The , Per-Olof Loof, made the biggest insider sale in the last 12 months. That single transaction was for US$949k worth of shares at a price of US$20.36 each. That means that an insider was selling shares at around the current price of US$17.60. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
All up, insiders sold more shares in KEMET than they bought, over the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like KEMET better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at KEMET Have Sold Stock Recently
There was substantially more insider selling, than buying, of KEMET shares over the last three months. In total, insiders sold US$1.6m worth of shares in that time. Meanwhile Executive VP & CFO Gregory Thompson bought US$200k worth, as we said above. Generally this level of net selling might be considered a bit bearish.
Insider Ownership of KEMET
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. KEMET insiders own about US$89m worth of shares. That equates to 8.8% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The KEMET Insider Transactions Indicate?
Unfortunately, there has been more insider selling of KEMET stock, than buying, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. While insiders do own shares, they don't own a heap, and they have been selling. We'd think twice before buying! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for KEMET.
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.
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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.