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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 First Republic Bank (NYSE:FRC), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 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.’
The Last 12 Months Of Insider Transactions At First Republic Bank
Over the last year, we can see that the biggest insider sale was by the Vice Chairman of the Board, Katherine August-deWilde, for US$13m worth of shares, at about US$101 per share. So we know that an insider sold shares at around the present share price of US$96.35. We generally don’t like to see insider selling, but the lower the sale price, the more it concerns us. In this case, the big sale took place at around the current price, so it’s not too bad (but it’s still not a positive).
In total, First Republic Bank insiders sold more than they bought over the last year. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like First Republic Bank better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
First Republic Bank Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at First Republic Bank. In total, insiders sold US$889k worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
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. A high insider ownership often makes company leadership more mindful of shareholder interests. First Republic Bank insiders own about US$163m worth of shares (which is 1.0% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The First Republic Bank Insider Transactions Indicate?
Insiders sold First Republic Bank shares recently, but they didn’t buy any. And our longer term analysis of insider transactions didn’t bring confidence, either. But it is good to see that First Republic Bank is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in First Republic Bank, you should check out this free report on analyst forecasts for the company.
Of course First Republic Bank 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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.