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Should You Be Worried About Insider Transactions At Bridgford Foods Corporation (NASDAQ:BRID)?

Simply Wall St

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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. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Bridgford Foods Corporation (NASDAQ:BRID).

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.

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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'

View our latest analysis for Bridgford Foods

The Last 12 Months Of Insider Transactions At Bridgford Foods

In the last twelve months, the biggest single sale by an insider was when the Chairman of the Board & Member of the Executive Committee, William Bridgford, sold US$116k worth of shares at a price of US$23.02 per share. That means that even when the share price was below the current price of US$24.25, an insider wanted to cash in some shares. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 40.4% of William Bridgford's holding. William Bridgford was the only individual insider to sell over the last year.

The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

NasdaqGM:BRID Recent Insider Trading, April 9th 2019

I will like Bridgford Foods better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Bridgford Foods Insiders Are Selling The Stock

Over the last three months, we've seen notably more insider selling, than insider buying, at Bridgford Foods. In that time, William Bridgford dumped US$116k worth of shares. Meanwhile Richard Bridgford bought US$5.9k 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.

Does Bridgford Foods Boast High Insider Ownership?

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. From our data, it seems that Bridgford Foods insiders own 2.6% of the company, worth about US$5.7m. However, it's possible that insiders might have an indirect interest through a more complex structure. Whilst better than nothing, we're not overly impressed by these holdings.

So What Do The Bridgford Foods Insider Transactions Indicate?

The insider sales have outweighed the insider buying, at Bridgford Foods, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Bridgford Foods is growing earnings. When you combine this with the relatively low insider ownership, we are very cautious about the stock. As the saying goes, only fools rush in. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

But note: Bridgford Foods 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.

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 editorial-team@simplywallst.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.