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 Alliance Data Systems Corporation (NYSE:ADS).
What Is Insider Buying?
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 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 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’.
The Last 12 Months Of Insider Transactions At Alliance Data Systems
In the last twelve months, the biggest single purchase by an insider was when insider Bruce Anderson bought US$291k worth of shares at a price of US$29.06 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$46.95. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn’t tell us much about what they think of current prices.
In the last twelve months Alliance Data Systems insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Alliance Data Systems Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Alliance Data Systems. Independent Director John Gerspach spent US$258k on stock, and there wasn’t any selling. This is a positive in our book as it implies some confidence.
Insider Ownership of Alliance Data Systems
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. It appears that Alliance Data Systems insiders own 2.9% of the company, worth about US$65m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Alliance Data Systems Tell Us?
It’s certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Given that insiders also own a fair bit of Alliance Data Systems we think they are probably pretty confident of a bright future. While we like knowing what’s going on with the insider’s ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For example, Alliance Data Systems has 6 warning signs (and 1 which doesn’t sit too well with us) we think you should know about.
But note: Alliance Data Systems 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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