Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
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 Reliance Steel & Aluminum Co. (NYSE:RS).
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 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 Reliance Steel & Aluminum
The Senior Advisor to the CEO & Director, Gregg Mollins, made the biggest insider sale in the last 12 months. That single transaction was for US$4.4m worth of shares at a price of US$89.51 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$95.52. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 18.8% of Gregg Mollins's holding.
In the last twelve months insiders netted US$17m for 190k shares sold. In the last year Reliance Steel & Aluminum insiders didn't buy any company stock. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Reliance Steel & Aluminum better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Reliance Steel & Aluminum Insiders Are Selling The Stock
The last three months saw significant insider selling at Reliance Steel & Aluminum. In total, insiders dumped US$4.3m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
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. Reliance Steel & Aluminum insiders own 3.7% of the company, currently worth about US$237m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Reliance Steel & Aluminum Insiders?
Insiders sold stock recently, but they haven't been buying. And even if we look to the last year, we didn't see any purchases. On the plus side, Reliance Steel & Aluminum makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in Reliance Steel & Aluminum, you should check out this free report on analyst forecasts for the company.
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 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.