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 before you buy or sell Community West Bancshares (NASDAQ:CWBC), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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 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 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 Community West Bancshares
The Independent Chairman of the Board William Peeples made the biggest insider purchase in the last 12 months. That single transaction was for US$51k worth of shares at a price of US$9.70 each. That means that even when the share price was higher than US$8.12 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. To us, it’s very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
While Community West Bancshares insiders bought shares during the last year, they didn’t sell. Their average price was about US$7.84. It’s great to see insiders putting their own cash into the company’s stock, albeit at below the recent share price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, 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.
Community West Bancshares Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Community West Bancshares. Overall, four insiders shelled out US$126k for shares in the company — and none sold. This is a positive in our book as it implies some confidence.
Insider Ownership of Community West Bancshares
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Insiders own 25% of Community West Bancshares shares, worth about US$17m. 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 Community West Bancshares Tell Us?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. When combined with notable insider ownership, these factors suggest Community West Bancshares insiders are well aligned, and that they may think the share price is too low. 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 3 warning signs for Community West Bancshares that deserve your attention before buying any shares.
Of course Community West Bancshares 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.
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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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