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 we'll take a look at whether insiders have been buying or selling shares in Territorial Bancorp Inc. (NASDAQ:TBNK).
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 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'.
The Last 12 Months Of Insider Transactions At Territorial Bancorp
In the last twelve months, the biggest single sale by an insider was when the Vice Chairman, Vernon Hirata, sold US$189k worth of shares at a price of US$25.73 per share. That means that an insider was selling shares at slightly below the current price (US$26.65). 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 4.8% of Vernon Hirata's holding.
Insiders in Territorial Bancorp didn't buy any shares in the last year. 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!
I will like Territorial Bancorp better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Territorial Bancorp insiders own 8.9% of the company, worth about US$22m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Territorial Bancorp Tell Us?
It doesn't really mean much that no insider has traded Territorial Bancorp shares in the last quarter. We don't take much encouragement from the transactions by Territorial Bancorp insiders. But it's good to see that insiders own shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Territorial Bancorp. Our analysis shows 2 warning signs for Territorial Bancorp (1 is potentially serious!) and we strongly recommend you look at these before investing.
But note: Territorial Bancorp 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.
If you decide to trade Territorial Bancorp, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.