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 Vector Group Ltd. (NYSE:VGR).
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.
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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
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The Last 12 Months Of Insider Transactions At Vector Group
President Howard Lorber made the biggest insider sale in the last 12 months. That single transaction was for US$9.9m worth of shares at a price of US$14.18 each. While the sale doesn’t make us feel confident, we do note it was conducted at a price well above the current share price, which is US$10.78. So it may not shed much light on insider confidence at current levels.
We note that in the last year insiders divested 1.60m shares for a total of US$21m. In total, Vector Group insiders sold more than they bought over the last year. They sold for an average price of about US$13.39. It is certainly not great to see that insiders have sold shares in the company. However, we do note that the average sale price was significantly higher than the current share price (which is US$10.78). 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!
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Insiders at Vector Group Have Sold Stock Recently
The last three months saw significant insider selling at Vector Group. Specifically, insiders ditched US$21m worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Insider Ownership of Vector Group
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Vector Group insiders own about US$174m worth of shares (which is 11% of the company). 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 Vector Group Insiders?
Insiders haven’t bought Vector Group stock in the last three months, but there was some selling. And there weren’t any purchases to give us comfort, over the last year. On the plus side, Vector Group 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 Vector Group, you should check out this free report on analyst forecasts for the company.
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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 email@example.com.