Insiders who sold Builders FirstSource, Inc.'s (NYSE:BLDR) earlier this year didn't have to weather this week's 8.5% slide

Despite the fact that Builders FirstSource, Inc.'s (NYSE:BLDR) value has dropped 8.5% in the last week insiders who sold US$2.2m worth of stock in the past 12 months have had less success. Insiders would probably have been better off holding on to their shares given that the average selling price of US$56.40 is still lower than the current share price.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Builders FirstSource

Builders FirstSource Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, Floyd Sherman, for US$1.9m worth of shares, at about US$55.09 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$79.84. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was 77% of Floyd Sherman's holding.

In the last year Builders FirstSource insiders didn't buy any company stock. 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 like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Does Builders FirstSource Boast High Insider Ownership?

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's great to see that Builders FirstSource insiders own 1.9% of the company, worth about US$212m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Builders FirstSource Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Builders FirstSource insiders selling. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Builders FirstSource. Every company has risks, and we've spotted 2 warning signs for Builders FirstSource (of which 1 is a bit concerning!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.