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 before you buy or sell First Republic Bank (NYSE:FRC), 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
First Republic Bank Insider Transactions Over The Last Year
Vice Chairman of the Board Katherine August-deWilde made the biggest insider sale in the last 12 months. That single transaction was for US$13m worth of shares at a price of US$101 each. That means that even when the share price was below the current price of US$104, an insider wanted to cash in some shares. While sellers have a variety of reasons for selling, this isn’t particularly great to see. As a general rule we consider it to be discouraging when insiders are selling below the current price. We note that the biggest single sale was only 36.7% of Katherine August-deWilde’s holding.
Over the last year, we note insiders sold 335.45k shares worth US$33m. In total, First Republic Bank insiders sold more than they bought over the last year. The sellers received a price of around US$99.70, on average. We don’t gain much confidence from insider selling near the recent share price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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
The last quarter saw substantial insider selling of First Republic Bank shares. In total, insiders dumped US$20m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Insider Ownership of First Republic Bank
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’s great to see that First Republic Bank insiders own 0.9% of the company, worth about US$163m. 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 Does This Data Suggest About First Republic Bank Insiders?
Insiders haven’t bought First Republic Bank stock in the last three months, but there was some selling. And even if we look to the last year, we didn’t see any purchases. But since First Republic Bank is profitable and growing, we’re not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn’t make us feel confident about the company. 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, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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