Should You Be Worried About Insider Transactions At Cal-Maine Foods, Inc. (NASDAQ:CALM)?

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Cal-Maine Foods, Inc. (NASDAQ:CALM).

Do Insider Transactions Matter?

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, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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.’

Check out our latest analysis for Cal-Maine Foods

Cal-Maine Foods Insider Transactions Over The Last Year

The Chairman Emeritus, Fred Adams, made the biggest insider sale in the last 12 months. That single transaction was for US$2.1m worth of shares at a price of US$49.95 each. While we don’t usually like to see insider selling, it’s more concerning if the sales take place at a lower price. The silver lining is that this sell-down took place above the latest price (US$38.59). So it is hard to draw any strong conclusion from it.

All up, insiders sold more shares in Cal-Maine Foods than they bought, over the last year. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

NasdaqGS:CALM Recent Insider Trading, August 6th 2019
NasdaqGS:CALM Recent Insider Trading, August 6th 2019

Insider Ownership of Cal-Maine Foods

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It’s great to see that Cal-Maine Foods insiders own 56% of the company, worth about US$1.0b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Cal-Maine Foods Tell Us?

There haven’t been any insider transactions in the last three months — that doesn’t mean much. It’s heartening that insiders own plenty of stock, but we’d like to see more insider buying, since the last year of Cal-Maine Foods insider transactions don’t fill us with confidence. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Cal-Maine Foods.

Of course Cal-Maine Foods 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.

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 editorial-team@simplywallst.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. Thank you for reading.