Insiders At KB Home Sold US$743k In Stock, Alluding To Potential Weakness

Over the past year, many KB Home (NYSE:KBH) insiders sold a significant stake in the company which may have piqued investors' interest. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for KB Home

The Last 12 Months Of Insider Transactions At KB Home

The Lead Independent Director, Melissa Lora, made the biggest insider sale in the last 12 months. That single transaction was for US$513k worth of shares at a price of US$53.19 each. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$53.87. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 5.1% of Melissa Lora's stake.

In the last year KB Home insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. KB Home insiders own 3.4% of the company, currently worth about US$147m 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.

So What Does This Data Suggest About KB Home Insiders?

The fact that there have been no KB Home insider transactions recently certainly doesn't bother us. While we feel good about high insider ownership of KB Home, we can't say the same about the selling of shares. 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. In terms of investment risks, we've identified 1 warning sign with KB Home and understanding this should be part of your investment process.

Of course KB Home may not be the best stock to buy. So you may wish to see this free collection of high quality 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.