It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Resideo Technologies, Inc. (NYSE:REZI).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Resideo Technologies Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chairman Roger Fradin bought US$998k worth of shares at a price of US$9.38 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$23.60. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Resideo Technologies insiders may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Resideo Technologies is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Resideo Technologies Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at Resideo Technologies. Overall, three insiders shelled out US$250k for shares in the company -- and none sold. This is a positive in our book as it implies some confidence.
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 Resideo Technologies insiders own 0.5% of the company, worth about US$16m. 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 Resideo Technologies Insiders?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. Insiders likely see value in Resideo Technologies shares, given these transactions (along with notable insider ownership of the company). 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. For instance, we've identified 3 warning signs for Resideo Technologies (1 is significant) you should be aware of.
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.
If you decide to trade Resideo Technologies, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
What are the risks and opportunities for Resideo Technologies?
Trading at 41% below our estimate of its fair value
Earnings are forecast to grow 11.03% per year
Earnings have grown 45% per year over the past 5 years
Debt is not well covered by operating cash flow
Large one-off items impacting financial results
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
Resideo Technologies, Inc. develops, manufactures, and sells comfort, residential thermal, and security solutions to the commercial and residential end markets in the United States, Europe, and internationally.
Very undervalued with mediocre balance sheet.