We often see insiders buying up shares in companies that perform well over the long term. 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 Ares Commercial Real Estate Corporation (NYSE:ACRE), you may well want to know whether insiders have been buying or selling.
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, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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’.
Ares Commercial Real Estate Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the insider, James Henderson, sold US$435k worth of shares at a price of US$17.41 per share. We generally don’t like to see insider selling, but the lower the sale price, the more it concerns us. The silver lining is that this sell-down took place above the latest price (US$8.28). So it may not tell us anything about how insiders feel about the current share price. The only individual insider seller over the last year was James Henderson.
Happily, we note that in the last year insiders paid US$616k for 58.00k shares. On the other hand they divested 57.02k shares, for US$934k. James Henderson sold a total of 57.02k shares over the year at an average price of US$16.38. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It appears that Ares Commercial Real Estate insiders own 4.6% of the company, worth about US$13m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Do The Ares Commercial Real Estate Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded Ares Commercial Real Estate shares in the last quarter. We don’t take much encouragement from the transactions by Ares Commercial Real Estate insiders. The modest level of insider ownership is, at least, some comfort. So while it’s helpful to know what insiders are doing in terms of buying or selling, it’s also helpful to know the risks that a particular company is facing. To that end, you should learn about the 5 warning signs we’ve spotted with Ares Commercial Real Estate (including 2 which shouldn’t be ignored).
But note: Ares Commercial Real Estate 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.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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