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 Patrick Industries, Inc. (NASDAQ:PATK).
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. 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.
Patrick Industries Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Executive Chairman, Todd Cleveland, sold US$1.0m worth of shares at a price of US$51.51 per share. That means that even when the share price was below the current price of US$54.68, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it’s only a weak signal. We note that the biggest single sale was only 2.8% of Todd Cleveland’s holding.
Over the last year we saw more insider selling of Patrick Industries shares, than buying. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Patrick Industries better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Patrick Industries Have Sold Stock Recently
The last quarter saw substantial insider selling of Patrick Industries shares. In total, insiders dumped US$1.6m worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Patrick Industries
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. Patrick Industries insiders own about US$75m worth of shares. That equates to 5.8% of the company. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Patrick Industries Insiders?
Insiders sold stock recently, but they haven’t been buying. And our longer term analysis of insider transactions didn’t bring confidence, either. While insiders do own shares, they don’t own a heap, and they have been selling. We’re in no rush to buy! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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