We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Federal Signal Corporation (NYSE:FSS).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
Federal Signal Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Independent Director, William Owens, for US$1.1m worth of shares, at about US$33.33 per share. That means that an insider was selling shares at around the current price of US$32.10. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign. William Owens was the only individual insider to sell over the last year.
Over the last year, we can see that insiders have bought 9.27k shares worth US$262k. But insiders sold 32.25k shares worth US$1.1m. 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!
I will like Federal Signal better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. It appears that Federal Signal insiders own 2.1% of the company, worth about US$42m. 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 Do The Federal Signal Insider Transactions Indicate?
The fact that there have been no Federal Signal insider transactions recently certainly doesn't bother us. We don't take much encouragement from the transactions by Federal Signal insiders. But it's good to see that insiders own shares in the company. 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.
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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