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 Cirrus Logic, Inc. (NASDAQ:CRUS), 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.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Cirrus Logic
Over the last year, we can see that the biggest insider sale was by the insider, Randy Carlson, for US$406k worth of shares, at about US$37.43 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$53.26. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was 100% of Randy Carlson's stake.
We note that in the last year insiders divested 46392 shares for a total of US$2.2m. Cirrus Logic insiders didn't buy any shares over the last year. You can see a visual depiction of insider transactions (by 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!
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Insiders at Cirrus Logic Have Sold Stock Recently
The last three months saw significant insider selling at Cirrus Logic. Specifically, insiders ditched US$1.4m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Cirrus Logic
Many investors like to check how much of a company is owned by 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. It appears that Cirrus Logic insiders own 0.8% of the company, worth about US$25m. 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 Do The Cirrus Logic Insider Transactions Indicate?
Insiders sold Cirrus Logic shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Cirrus Logic.
Of course Cirrus Logic may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.