Insider Stock Buying Reaches US$1.74m On Smith Douglas Homes

Quite a few insiders have dramatically grown their holdings in Smith Douglas Homes Corp. (NYSE:SDHC) over the past 12 months. An insider's optimism about the company's prospects is a positive sign.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

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The Last 12 Months Of Insider Transactions At Smith Douglas Homes

In the last twelve months, the biggest single purchase by an insider was when Founder & Executive Chairman Thomas Bradbury bought US$701k worth of shares at a price of US$19.47 per share. That means that an insider was happy to buy shares at above the current price of US$18.57. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months Smith Douglas Homes insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

Check out our latest analysis for Smith Douglas Homes

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data suggests Smith Douglas Homes insiders own 0.4% of the company, worth about US$3.6m. We consider this fairly low insider ownership.

What Might The Insider Transactions At Smith Douglas Homes Tell Us?

It doesn't really mean much that no insider has traded Smith Douglas Homes shares in the last quarter. However, our analysis of transactions over the last year is heartening. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Smith Douglas Homes stock. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 2 warning signs for Smith Douglas Homes you should be aware of, and 1 of them is significant.

But note: Smith Douglas Homes may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

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.