We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in Teradyne, Inc. (NASDAQ:TER).
Do Insider Transactions Matter?
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 don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
Teradyne Insider Transactions Over The Last Year
The Executive Vice President of Corporate Development, Walter Vahey, made the biggest insider sale in the last 12 months. That single transaction was for US$1.6m worth of shares at a price of US$63.62 each. So what is clear is that an insider saw fit to sell at around the current price of US$57.85. While we don’t usually like to see insider selling, it’s more concerning if the sales take place at a lower price. We note that this sale took place at around the current price, so it isn’t a major concern, though it’s hardly a good sign.
In the last year Teradyne insiders didn’t buy any company stock. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. It appears that Teradyne insiders own 0.4% of the company, worth about US$43m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Teradyne Insider Transactions Indicate?
The fact that there have been no Teradyne insider transactions recently certainly doesn’t bother us. Our analysis of Teradyne insider transactions leaves us cautious. But it’s good to see that insiders own shares in the company. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Teradyne. In terms of investment risks, we’ve identified 1 warning sign with Teradyne and understanding it should be part of your investment process.
Of course Teradyne 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.
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.
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