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 Malibu Boats, Inc. (NASDAQ:MBUU), you may well want to know whether insiders have been buying or selling.
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Malibu Boats
Over the last year, we can see that the biggest insider sale was by the CEO & Director, Jack Springer, for US$3.1m worth of shares, at about US$80.08 per share. That means that an insider was selling shares at around the current price of US$77.71. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern. Notably Jack Springer was also the biggest buyer, having purchased US$961k worth of shares.
Over the last year, we can see that insiders have bought 37.50k shares worth US$961k. But insiders sold 70.00k shares worth US$5.2m. Over the last year we saw more insider selling of Malibu Boats shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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Malibu Boats Insiders Are Selling The Stock
The last three months saw significant insider selling at Malibu Boats. In total, insiders dumped US$4.6m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Malibu Boats insiders own about US$20m worth of shares. That equates to 1.2% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Malibu Boats Insider Transactions Indicate?
Insiders haven't bought Malibu Boats stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn't make us feel much more positive. While insiders do own shares, they don't own a heap, and they have been selling. We're in no rush to buy! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Malibu Boats has 3 warning signs and it would be unwise to ignore these.
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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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