We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we’ll take a look at whether insiders have been buying or selling shares in HomeStreet, Inc. (NASDAQ:HMST).
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 on the market. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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’.
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HomeStreet Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Edward Schultz for US$343k worth of shares, at about US$29.48 per share. So what is clear is that an insider saw fit to sell at around the current price of US$25.13. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
Over the last year, we can see that insiders have bought 23.90k shares worth US$652k. But insiders sold 40.39k shares worth US$1.2m. All up, insiders sold more shares in HomeStreet than they bought, over the last year. The average sell price was around US$29.04. We don’t gain much confidence from insider selling near the recent share price. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 2.8% of HomeStreet shares, worth about US$17m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At HomeStreet Tell Us?
The fact that there have been no HomeStreet insider transactions recently certainly doesn’t bother us. Still, the insider transactions at HomeStreet in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course HomeStreet may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.