Did First Merchants Corporation (NASDAQ:FRME) Insiders Buy Up More Shares?

By
Simply Wall St
Published
December 24, 2020

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 we'll take a look at whether insiders have been buying or selling shares in First Merchants Corporation (NASDAQ:FRME).

What Is Insider Buying?

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, rules govern insider transactions, and certain disclosures are required.

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'.

Check out our latest analysis for First Merchants

First Merchants Insider Transactions Over The Last Year

The Independent Director Michael Marhenke made the biggest insider purchase in the last 12 months. That single transaction was for US$337k worth of shares at a price of US$33.66 each. That means that an insider was happy to buy shares at around the current price of US$36.71. That means they have been optimistic about the company in the past, though they may have changed their mind. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider purchases were made at close to current prices.

Happily, we note that in the last year insiders paid US$885k for 30.63k shares. On the other hand they divested 13.32k shares, for US$343k. In the last twelve months there was more buying than selling by First Merchants insiders. They paid about US$28.90 on average. To my mind it is good that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

NasdaqGS:FRME Insider Trading Volume December 24th 2020

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Are First Merchants Insiders Buying Or Selling?

We've only seen a tiny insider purchase valued at US$1.5k, in the last three months. Overall, we don't think these recent trades are particularly informative, one way or the other.

Does First Merchants Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. First Merchants insiders own about US$27m worth of shares. That equates to 1.4% of the company. 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 First Merchants Tell Us?

Our data shows a little insider buying, but no selling, in the last three months. The net investment is not enough to encourage us much. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in First Merchants and their transactions don't cause us concern. 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. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of First Merchants.

Of course First Merchants 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.

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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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