It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Altra Industrial Motion Corp. (NASDAQ:AIMC), you may well want to know whether insiders have been buying or selling.
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 in the company. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Altra Industrial Motion
The VP & CFO, Christian Storch, made the biggest insider sale in the last 12 months. That single transaction was for US$692k worth of shares at a price of US$37.23 each. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this large sale was at well above current price of US$27.03. So it may not tell us anything about how insiders feel about the current share price.
Over the last year, we can see that insiders have bought 18000 shares worth US$642k. But they sold 28496 for US$944k. In total, Altra Industrial Motion insiders sold more 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Altra Industrial Motion Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Altra Industrial Motion. In total, Lead Director Larry McPherson sold US$252k 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.
Does Altra Industrial Motion Boast High Insider Ownership?
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. Insiders own 1.1% of Altra Industrial Motion shares, worth about US$20m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Altra Industrial Motion Insider Transactions Indicate?
An insider sold Altra Industrial Motion shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in Altra Industrial Motion, you should check out this free report on analyst forecasts for the company.
But note: Altra Industrial Motion 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.
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 email@example.com. 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.