We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Alleghany Corporation (NYSE:Y).
What Is Insider Buying?
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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
See our latest analysis for Alleghany
The Last 12 Months Of Insider Transactions At Alleghany
In the last twelve months, the biggest single purchase by an insider was when Independent Director Lauren Tyler bought US$993k worth of shares at a price of US$672 per share. That means that an insider was happy to buy shares at around the current price of US$692. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it’s less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. In this case we’re pleased to report that the insider bought shares at close to current prices. The only individual insider to buy over the last year was Lauren Tyler.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Alleghany Insiders Bought Stock Recently
At Alleghany,over the last quarter, we have observed quite a lot more insider buying than insider selling. We can see that Lauren Tyler paid US$993k for shares in the company. But we did see insider selling worth US$573k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.
Insider Ownership of Alleghany
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Alleghany insiders own about US$342m worth of shares (which is 3.4% of the company). 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 Alleghany Tell Us?
It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. When combined with notable insider ownership, these factors suggest Alleghany insiders are well aligned, and quite possibly think the share price is too low. Nice! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity 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 editorial-team@simplywallst.com. 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.