Read This Before Buying TowneBank (NASDAQ:TOWN) Shares

We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell TowneBank (NASDAQ:TOWN), you may well want to know whether insiders have been buying or selling.

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, most countries require that the company discloses such transactions to the market.

Insider transactions are not the most important thing when it comes to long-term investing. 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'.

View our latest analysis for TowneBank

The Last 12 Months Of Insider Transactions At TowneBank

In the last twelve months, the biggest single sale by an insider was when the insider, Bradford Cherry, sold US$401k worth of shares at a price of US$20.06 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$28.50. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent 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. This single sale was just 12% of Bradford Cherry's stake. Notably Bradford Cherry was also the biggest buyer, having purchased US$87k worth of shares.

In total, TowneBank insiders sold more than they bought over the last year. 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 are like me, then you will not want to miss this free list of growing companies that insiders are buying.

TowneBank Insiders Are Selling The Stock

The last three months saw some TowneBank insider selling. Insiders only netted US$43k selling shares, in that period. It's not great to see insider selling, nor the lack of recent buyers. But the amount sold isn't enough for us to put any weight on it.

Insider Ownership of TowneBank

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. TowneBank insiders own 8.7% of the company, currently worth about US$174m 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.

So What Does This Data Suggest About TowneBank Insiders?

We did not see any insider buying in the last three months, but we did see selling. But given the selling was modest, we're not worried. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of TowneBank insider transactions don't fill us with confidence. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of TowneBank.

But note: TowneBank 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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