It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in NorthWestern Corporation (NYSE:NWE).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 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’.
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The Last 12 Months Of Insider Transactions At NorthWestern
Over the last year, we can see that the biggest insider sale was by President Robert Rowe for US$485k worth of shares, at about US$55.38 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$62.17. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. We note that the biggest single sale was 66.4% of Robert Rowe’s holding.
Over the last year we saw more insider selling of NorthWestern shares, than buying. They sold for an average price of about US$55.30. It’s not particularly great to see insiders were selling shares at below recent prices. But we wouldn’t put too much weight on the insider selling. 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!
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Insiders at NorthWestern Have Sold Stock Recently
The last three months saw significant insider selling at NorthWestern. Specifically, insiders ditched US$177k worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. NorthWestern insiders own about US$15m worth of shares. That equates to 0.5% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At NorthWestern Tell Us?
Insiders haven’t bought NorthWestern stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn’t bring confidence, either. But it is good to see that NorthWestern is growing earnings. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’re in no rush to buy! 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.
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To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.