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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 we’ll take a look at whether insiders have been buying or selling shares in Farmer Bros. Co. (NASDAQ:FARM).
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 on the market. 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 it is perfectly logical to keep tabs on what insiders are doing. 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.’
The Last 12 Months Of Insider Transactions At Farmer Bros
In the last twelve months, the biggest single sale by an insider was when the , Carol Waite, sold US$656k worth of shares at a price of US$31.22 per share. While we don’t usually like to see insider selling, it’s more concerning if the sales take price at a lower price. The silver lining is that this sell-down took place above the latest price (US$16.58). So it may not shed much light on insider confidence at current levels. Carol Waite was the only individual insider to sell shares in the last twelve months.
Carol Waite sold a total of 785k shares over the year at an average price of US$1.51. 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!
Insider Ownership of Farmer Bros
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. Farmer Bros insiders own about US$21m worth of shares. That equates to 7.3% of the company. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Farmer Bros Insiders?
While there has not been any insider buying in the last three months, there has been selling. But the sales were small, so we’re not concerned. Recent insider selling makes us a little nervous, in light of the broader picture of Farmer Bros insider transactions. But it’s good to see that insiders own shares in the company. Of course, the future is what matters most. So if you are interested in Farmer Bros, you should check out this free report on analyst forecasts for the company.
But note: Farmer Bros 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.