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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 FAT Brands Inc. (NASDAQ:FAT), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
FAT Brands Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by John Junger for US$71k worth of shares, at about US$5.50 per share. That means that even when the share price was higher than US$4.30 (the recent price), an insider wanted to purchase shares. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Over the last year, we can see that insiders have bought 70338.22 shares worth US$404k. In the last twelve months FAT Brands insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at FAT Brands Have Bought Stock Recently
Over the last quarter, FAT Brands insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought US$79k worth of shares. This is a positive in our book as it implies some confidence.
Does FAT Brands Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. From looking at our data, insiders own US$924k worth of FAT Brands stock, about 1.8% of the company. We consider this fairly low insider ownership.
What Might The Insider Transactions At FAT Brands Tell Us?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that FAT Brands insiders are expecting a bright future. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
But note: FAT Brands 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 aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.