We often see insiders buying up shares in companies that perform well over the long term. 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 FAT Brands Inc. (NASDAQ:FAT), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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, 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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
FAT Brands Insider Transactions Over The Last Year
insider Scott Fortunoff made the biggest insider purchase in the last 12 months. That single transaction was for US$112k worth of shares at a price of US$5.10 each. That means that an insider was happy to buy shares at above the current price of US$4.57. 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. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
FAT Brands insiders may have bought shares in the last year, but they didn’t sell any. The average buy price was around US$3.16. It is certainly positive to see that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today’s share price. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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.
Does FAT Brands Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data indicates that FAT Brands insiders own about US$4.2m worth of shares (which is 7.8% of the company). We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About FAT Brands Insiders?
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. We’d like to see bigger individual holdings. However, we don’t see anything to make us think FAT Brands insiders are doubting the company. Along with insider transactions, I recommend checking if FAT Brands is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course FAT Brands 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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