Huntington Bancshares Incorporated operates as a holding company for The Huntington National Bank that provides commercial, small business, consumer, and mortgage banking services. Huntington Bancshares is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 90.25k shares during this period. It is widely considered that insider selling stock in their own companies is potentially a bearish signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.
Who Are The Insiders?
There were more Huntington Bancshares insiders that have sold shares than those that have bought. In total, individual insiders own over 11.37 million shares in the business, which makes up around 1.03% of total shares outstanding. Insiders that have recently trimmed down their holdings are David Porteous (management) and Paul Heller (board member) .
Is This Consistent With Future Growth?
Analysts’ expectations for earnings over the next 3 years of 27.33% provides a satisfactory outlook for the company. However this is inconsistent with the signal company insiders are sending with their net selling activity. Digging deeper into the line items, Huntington Bancshares is expected to experience a double-digit top-line growth over the next year, which seems to flow through somewhat to its earnings growth of 7.92%. High levels of sustained revenue growth as well as improved cost management could see higher levels of future earnings. Though, insiders net selling activity suggests a more pessimistic outlook for the company. Or they may merely view any growth potential is overly factored into the share price, providing a favourable time to divest.
Can Share Price Volatility Explain The Sell?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Huntington Bancshares’s shares ranged between $16.11 and $14.44 over the past three months. This suggests a relatively insignificant share price movement, with a small change of 11.57%. This could indicate insider transactions are not driven by share price changes but perhaps they may simply want to diversify their holdings, distribute stock to investors, or simply require the cash for personal reasons.
Huntington Bancshares’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, although the positive expected earnings growth challenges this assumption, and the share price movement may be too trivial to cash in on any mispricing. But we must also be aware that insiders divesting may not actually be based their views on the company’s outlook. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two essential aspects you should further examine:
- Financial Health: Does Huntington Bancshares have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Huntington Bancshares? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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.