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 Colfax Corporation (NYSE:CFX).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
Colfax Insider Transactions Over The Last Year
The Executive VP and CEO & President of ESAB, Shyam Kambeyanda, made the biggest insider sale in the last 12 months. That single transaction was for US$341k worth of shares at a price of US$22.97 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$44.04. 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. 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. This single sale was just 21% of Shyam Kambeyanda's stake.
In the last twelve months insiders purchased 16.36k shares for US$419k. But insiders sold 26.96k shares worth US$767k. All up, insiders sold more shares in Colfax than they bought, over the last year. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Colfax insiders own 13% of the company, currently worth about US$745m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Colfax Tell Us?
It doesn't really mean much that no insider has traded Colfax shares in the last quarter. While we feel good about high insider ownership of Colfax, we can't say the same about the selling of shares. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Colfax. Every company has risks, and we've spotted 2 warning signs for Colfax (of which 1 is concerning!) you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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