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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 shareholders might well want to know whether insiders have been buying or selling shares in AvalonBay Communities, Inc. (NYSE:AVB).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. 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.’
AvalonBay Communities Insider Transactions Over The Last Year
The Chairman, Timothy Naughton, made the biggest insider sale in the last 12 months. That single transaction was for US$4.4m worth of shares at a price of US$197 each. That means that even when the share price was below the current price of US$214, an insider wanted to cash in some shares. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don’t know for sure what they think of the stock price. We note that the biggest single sale was only 13.1% of Timothy Naughton’s holding.
We note that in the last year insiders divested 74025 shares for a total of US$14m. AvalonBay Communities insiders didn’t buy any shares over the last year. 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!
Insiders at AvalonBay Communities Have Sold Stock Recently
The last three months saw significant insider selling at AvalonBay Communities. Specifically, insiders ditched US$2.5m worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of AvalonBay Communities
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that AvalonBay Communities insiders own 0.3% of the company, worth about US$92m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At AvalonBay Communities Tell Us?
Insiders sold stock recently, but they haven’t been buying. And there weren’t any purchases to give us comfort, over the last year. On the plus side, AvalonBay Communities makes money, and is growing profits. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’re in no rush to buy! Of course, the future is what matters most. So if you are interested in AvalonBay Communities, you should check out this free report on analyst forecasts for the company.
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 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 email@example.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.