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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 Summit Materials, Inc. (NYSE:SUM), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Summit Materials Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by President Anne Noonan for US$1.0m worth of shares, at about US$15.24 per share. So it's clear an insider wanted to buy, at around the current price, which is US$18.27. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. Happily, the Summit Materials insider decided to buy shares at close to current prices. Anne Noonan was the only individual insider to buy during the last year.
You can see a visual depiction of insider transactions (by companies and 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!
Summit Materials is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Summit Materials insiders own about US$12m worth of shares. That equates to 0.6% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Summit Materials Insiders?
It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Given that insiders also own a fair bit of Summit Materials we think they are probably pretty confident of a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example - Summit Materials has 1 warning sign we think you should be aware of.
But note: Summit Materials may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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