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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. 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 Wayfair Inc. (NYSE:W).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
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. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
Wayfair Insider Transactions Over The Last Year
Lead Independent Director Michael Kumin made the biggest insider purchase in the last 12 months. That single transaction was for US$1.7m worth of shares at a price of US$89.25 each. Even though the purchase was made at a significantly lower price than the recent price (US$162), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn’t tell us much about how insiders feel about the current share price.
In the last twelve months insiders purchased 24350 shares for US$2.3m. On the other hand they divested 5104 shares, for US$615k. Overall, Wayfair insiders were net buyers last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
Wayfair is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Wayfair Insiders Bought Stock Recently
At Wayfair,over the last quarter, we have observed quite a lot more insider buying than insider selling. We can see that Michael Kumin paid US$423k for shares in the company. On the other hand, Director Romero Rodrigues netted US$15k by selling. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.
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. A high insider ownership often makes company leadership more mindful of shareholder interests. Wayfair insiders own about US$5.1b worth of shares (which is 34% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Wayfair Tell Us?
It’s certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn’t make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest Wayfair insiders are well aligned, and quite possibly think the share price is too low. One for the watchlist, at least! Of course, the future is what matters most. So if you are interested in Wayfair, you should check out this free report on analyst forecasts for the company.
Of course Wayfair 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 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.