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 Coastal Financial Corporation (NASDAQ:CCB), you may well want to know whether insiders have been buying or selling.
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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Coastal Financial
Over the last year, we can see that the biggest insider purchase was by Independent Vice Chairman Andrew Skotdal for US$64k worth of shares, at about US$16.00 per share. That means that an insider was happy to buy shares at above the current price of US$14.10. 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.
In the last twelve months Coastal Financial insiders were buying shares, but not selling. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Coastal Financial is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Does Coastal Financial Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Coastal Financial insiders own 22% of the company, worth about US$37m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Do The Coastal Financial Insider Transactions Indicate?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Coastal Financial and their transactions don’t cause us concern. 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. To help with this, we’ve discovered 2 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Coastal Financial.
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.
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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. Thank you for reading.