Should You Take Comfort From Insider Transactions At The Middleby Corporation (NASDAQ:MIDD)?

By
Simply Wall St
Published
September 01, 2020
NasdaqGS:MIDD

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 shareholders might well want to know whether insiders have been buying or selling shares in The Middleby Corporation (NASDAQ:MIDD).

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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

View our latest analysis for Middleby

Middleby Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by CEO & Director Timothy FitzGerald for US$1.5m worth of shares, at about US$80.00 per share. So it's clear an insider wanted to buy, at around the current price, which is US$97.90. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider purchases were made at close to current prices.

Happily, we note that in the last year insiders paid US$2.4m for 32.47k shares. But they sold 200.00 shares for US$23k. Overall, Middleby insiders were net buyers during the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
NasdaqGS:MIDD Insider Trading Volume September 1st 2020

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Does Middleby Boast High Insider Ownership?

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. It's great to see that Middleby insiders own 2.3% of the company, worth about US$127m. 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 Do The Middleby Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Middleby shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like Middleby insiders think the business has merit. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Every company has risks, and we've spotted 2 warning signs for Middleby (of which 1 is a bit concerning!) you should know about.

But note: Middleby 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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