We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Heritage Commerce Corp (NASDAQ:HTBK), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
Heritage Commerce Insider Transactions Over The Last Year
The President, Walter Kaczmarek, made the biggest insider sale in the last 12 months. That single transaction was for US$204k worth of shares at a price of US$9.25 each. That means that even when the share price was below the current price of US$11.87, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 17% of Walter Kaczmarek's holding.
Over the last year we saw more insider selling of Heritage Commerce shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Heritage Commerce
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Heritage Commerce insiders own about US$29m worth of shares. That equates to 4.1% 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 Do The Heritage Commerce Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. Still, the insider transactions at Heritage Commerce in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk 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. You'd be interested to know, that we found 1 warning sign for Heritage Commerce and we suggest you have a look.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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