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 NVE Corporation (NASDAQ:NVEC), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 NVE
In the last twelve months, the biggest single sale by an insider was when the CFO, Treasurer & Secretary, Curt Reynders, sold US$108k worth of shares at a price of US$75.67 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this large sale was at well above current price of US$50.00. So it may not tell us anything about how insiders feel about the current share price. Curt Reynders was the only individual insider to sell shares in the last twelve months.
Curt Reynders sold a total of 2.63k shares over the year at an average price of US$75.14. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Does NVE Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Based on our data, NVE insiders have about 1.8% of the stock, worth approximately US$4.3m. I generally like to see higher levels of ownership.
So What Do The NVE Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded NVE shares in the last quarter. Our analysis of NVE insider transactions leaves us unenthusiastic. And usually insiders own more stock in the company, according to our data. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. While conducting our analysis, we found that NVE has 2 warning signs and it would be unwise to ignore these.
But note: NVE may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.
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