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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. 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 The Sherwin-Williams Company (NYSE:SHW), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. 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.'
Sherwin-Williams Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the , Robert Lynch, for US$3.0m worth of shares, at about US$434 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$474. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent 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 34.1% of Robert Lynch's holding.
Happily, we note that in the last year insiders paid US$469k for 1175 shares. On the other hand they divested 17668 shares, for US$7.7m. All up, insiders sold more shares in Sherwin-Williams than they bought, over the last year. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Sherwin-Williams Have Sold Stock Recently
There was substantially more insider selling, than buying, of Sherwin-Williams shares over the last three months. In total, Robert Lynch sold US$3.0m worth of shares in that time. Meanwhile Jeffrey Fettig bought US$216k worth. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.
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. It's great to see that Sherwin-Williams insiders own 0.4% of the company, worth about US$163m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Sherwin-Williams Tell Us?
Unfortunately, there has been more insider selling of Sherwin-Williams stock, than buying, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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.
Of course Sherwin-Williams may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.