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 Old Dominion Freight Line, Inc. (NASDAQ:ODFL).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Old Dominion Freight Line
Over the last year, we can see that the biggest insider sale was by the Senior Executive Chairman, Earl Congdon, for US$9.4m worth of shares, at about US$167 per share. That means that even when the share price was below the current price of US$174, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 2.2% of Earl Congdon's holding.
We note that in the last year insiders divested 89750 shares for a total of US$15m. In the last year Old Dominion Freight Line insiders didn't buy any company stock. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Old Dominion Freight Line Have Sold Stock Recently
The last three months saw significant insider selling at Old Dominion Freight Line. Specifically, insiders ditched US$15m 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.
Does Old Dominion Freight Line 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. It's great to see that Old Dominion Freight Line insiders own 11% of the company, worth about US$1.6b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Old Dominion Freight Line Tell Us?
Insiders sold stock recently, but they haven't been buying. And even if we look to the last year, we didn't see any purchases. But since Old Dominion Freight Line is profitable and growing, we're not too worried by this. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in Old Dominion Freight Line, you should check out this free report on analyst forecasts for the company.
But note: Old Dominion Freight Line 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 firstname.lastname@example.org. 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.