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 we’ll take a look at whether insiders have been buying or selling shares in Hersha Hospitality Trust (NYSE:HT).
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, 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Hersha Hospitality Trust
CEO & Trustee Jay Shah made the biggest insider purchase in the last 12 months. That single transaction was for US$379k worth of shares at a price of US$11.96 each. That means that even when the share price was higher than US$2.61 (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. To us, it’s very important to consider the price insiders pay for shares. 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.
Happily, we note that in the last year insiders paid US$3.0m for 272.15k shares. But insiders sold 15000 shares worth US$217k. Overall, Hersha Hospitality Trust insiders were net buyers last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Hersha Hospitality Trust is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Hersha Hospitality Trust Insiders Bought Stock Recently
Over the last three months, we’ve seen significantly more insider buying, than insider selling, at Hersha Hospitality Trust. In fact, six insiders bought US$2.3m worth of shares. But Independent Trustee Thomas Hutchison sold shares worth US$73k. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.
Insider Ownership of Hersha Hospitality Trust
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Our data indicates that Hersha Hospitality Trust insiders own about US$5.9m worth of shares (which is 5.2% of the company). Whilst better than nothing, we’re not overly impressed by these holdings.
So What Does This Data Suggest About Hersha Hospitality Trust Insiders?
It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But we don’t feel the same about the fact the company is making losses. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Hersha Hospitality Trust stock. So while it’s helpful to know what insiders are doing in terms of buying or selling, it’s also helpful to know the risks that a particular company is facing. Every company has risks, and we’ve spotted 1 warning sign for Hersha Hospitality Trust you should know about.
Of course Hersha Hospitality Trust 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 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.
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