We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Watsco, Inc. (NYSE:WSO), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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.’
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Watsco Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Senior VP & Secretary, Barry Logan, for US$353k worth of shares, at about US$141 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$156. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. We note that the biggest single sale was only 2% of Barry Logan’s holding. Barry Logan was the only individual insider to sell over the last year.
The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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Insider Ownership of Watsco
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Watsco insiders own 9.4% of the company, currently worth about US$555m based on the recent share price. 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 Watsco Insiders?
It doesn’t really mean much that no insider has traded Watsco shares in the last quarter. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the Watsco insiders selling. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Watsco.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.