It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell CF Bankshares Inc. (NASDAQ:CFBK), you may well want to know whether insiders have been buying or selling.
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 in the company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
CF Bankshares Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director David Royer for US$74k worth of shares, at about US$10.50 per share. Even though the purchase was made at a significantly lower price than the recent price (US$19.93), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
While CF Bankshares insiders bought shares during the last year, they didn't sell. Their average price was about US$12.74. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
CF Bankshares is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at CF Bankshares Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at CF Bankshares. Overall, two insiders shelled out US$54k for shares in the company -- and none sold. This could be interpreted as suggesting a positive outlook.
Insider Ownership of CF Bankshares
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 12% of CF Bankshares shares, worth about US$16m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At CF Bankshares Tell Us?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. Insiders likely see value in CF Bankshares shares, given these transactions (along with notable insider ownership of the company). 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. At Simply Wall St, we've found that CF Bankshares has 3 warning signs (2 are significant!) that deserve your attention before going any further with your analysis.
But note: CF Bankshares 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 currently account for open market transactions and private dispositions, but not derivative transactions.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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