It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Booz Allen Hamilton Holding Corporation (NYSE:BAH), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
Booz Allen Hamilton Holding Insider Transactions Over The Last Year
The Independent Director, Melody Barnes, made the biggest insider sale in the last 12 months. That single transaction was for US$199k worth of shares at a price of US$80.22 each. That means that an insider was selling shares at slightly below the current price (US$85.90). 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 17% of Melody Barnes’s holding.
In the last year Booz Allen Hamilton Holding insiders didn’t buy any company stock. You can see the insider transactions (by companies and 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Booz Allen Hamilton Holding
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. Booz Allen Hamilton Holding insiders own about US$237m worth of shares (which is 2.0% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Booz Allen Hamilton Holding Tell Us?
It doesn’t really mean much that no insider has traded Booz Allen Hamilton Holding shares in the last quarter. It’s great to see high levels of insider ownership, but looking back over the last year, we don’t gain confidence from the Booz Allen Hamilton Holding insiders selling. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. At Simply Wall St, we found 1 warning sign for Booz Allen Hamilton Holding that deserve your attention before buying any shares.
Of course Booz Allen Hamilton Holding 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.
When trading Booz Allen Hamilton Holding or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.