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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. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Fairfax Financial Holdings Limited (TSE:FFH), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
The Last 12 Months Of Insider Transactions At Fairfax Financial Holdings
In the last twelve months, the biggest single sale by an insider was when the , Andrew Barnard, sold CA$2.0m worth of shares at a price of CA$611 per share. That means that even when the share price was below the current price of CA$646, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it’s only a weak signal. It is worth noting that this sale was only 6.2% of Andrew Barnard’s holding. The only individual insider seller over the last year was Andrew Barnard.
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!
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Fairfax Financial Holdings insiders own 7.8% of the company, currently worth about CA$1.4b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Fairfax Financial Holdings Tell Us?
The fact that there have been no Fairfax Financial Holdings insider transactions recently certainly doesn’t bother us. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the Fairfax Financial Holdings insiders selling. Of course, the future is what matters most. So if you are interested in Fairfax Financial Holdings, you should check out this free report on analyst forecasts for the company.
But note: Fairfax Financial Holdings 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.