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 before you buy or sell Universal Display Corporation (NASDAQ:OLED), 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, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. 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 Universal Display
Over the last year, we can see that the biggest insider sale was by the Independent Director, Lawrence Lacerte, for US$6.2m worth of shares, at about US$209 per share. So what is clear is that an insider saw fit to sell at around the current price of US$205. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).
We note that in the last year insiders divested 78703 shares for a total of US$14m. In the last year Universal Display insiders didn't buy any company stock. 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!
I will like Universal Display better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Universal Display Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Universal Display. Specifically, insiders ditched US$8.4m 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 Universal Display Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Universal Display insiders own 9.4% of the company, currently worth about US$906m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Universal Display Insider Transactions Indicate?
Insiders haven't bought Universal Display stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. On the plus side, Universal Display makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. Of course, the future is what matters most. So if you are interested in Universal Display, you should check out this free report on analyst forecasts for the company.
Of course Universal Display 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 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.