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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we’ll take a look at whether insiders have been buying or selling shares in Sterling Bancorp (NYSE:STL).
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 on the market. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Sterling Bancorp
In the last twelve months, the biggest single sale by an insider was when the Independent Director, James Landy, sold US$1.1m worth of shares at a price of US$19.36 per share. That means that an insider was selling shares at slightly below the current price (US$21.40). 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. 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. It is worth noting that this sale was only 12.6% of James Landy’s holding.
In total, Sterling Bancorp insiders sold more than they bought over the last year. They sold for an average price of about US$20.11. It’s not particularly great to see insiders were selling shares at below recent prices. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Sterling Bancorp Have Sold Stock Recently
The last three months saw significant insider selling at Sterling Bancorp. In total, insiders sold US$459k 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.
Insider Ownership of Sterling Bancorp
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It appears that Sterling Bancorp insiders own 1.9% of the company, worth about US$84m. 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 Does This Data Suggest About Sterling Bancorp Insiders?
Insiders haven’t bought Sterling Bancorp stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. But since Sterling Bancorp is profitable and growing, we’re not too worried by this. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’d think twice before buying! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Sterling 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.