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 International Paper Company (NYSE:IP).
Do Insider Transactions Matter?
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, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
International Paper Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Senior VP & CFO, Timothy Nicholls, sold US$1.9m worth of shares at a price of US$42.44 per share. We generally don’t like to see insider selling, but the lower the sale price, the more it concerns us. The good news is that this large sale was at well above current price of US$31.05. So it is hard to draw any strong conclusion from it.
Happily, we note that in the last year insiders paid US$187k for 5.66k shares. On the other hand they divested 112618 shares, for US$4.8m. In total, International Paper insiders sold more than they bought over the last year. You can see a visual depiction of insider transactions (by 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!
I will like International Paper better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
International Paper Insiders Are Selling The Stock
Over the last three months, we’ve seen notably more insider selling, than insider buying, at International Paper. In that time, insiders dumped US$930k worth of shares. Meanwhile insiders bought US$187k worth , as we said above . The share price has moved a bit recently, but it’s hard to argue that the selling is a positive.
Insider Ownership of International Paper
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. International Paper insiders own about US$40m worth of shares. That equates to 0.3% of the company. 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 International Paper Tell Us?
The insider sales have outweighed the insider buying, at International Paper, in the last three months. Zooming out, the longer term picture doesn’t give us much comfort. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. So we’d only buy after careful consideration. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. Every company has risks, and we’ve spotted 6 warning signs for International Paper you should know about.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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. Thank you for reading.