It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Surgery Partners, Inc. (NASDAQ:SGRY), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
The Last 12 Months Of Insider Transactions At Surgery Partners
Over the last year, we can see that the biggest insider purchase was by Executive VP & CFO Thomas Cowhey for US$150k worth of shares, at about US$6.00 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$20.29. Because it occurred at a lower valuation, it doesn’t tell us much about whether insiders might find today’s price attractive.
Happily, we note that in the last year insiders paid US$305k for 51.00k shares. On the other hand they divested 5.32k shares, for US$110k. In the last twelve months there was more buying than selling by Surgery Partners insiders. 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.
Surgery Partners Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Surgery Partners. In total, Independent Director Teresa DeLuca sold US$110k worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Surgery Partners insiders own 5.5% of the company, worth about US$56m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Surgery Partners Insider Transactions Indicate?
An insider sold stock recently, but they haven’t been buying. On the other hand, the insider transactions over the last year are encouraging. We like that insiders own a fair amount of the company. So the recent selling doesn’t worry us too much. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Surgery Partners. In terms of investment risks, we’ve identified 3 warning signs with Surgery Partners and understanding these should be part of your investment process.
Of course Surgery Partners 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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