Tri Pointe Homes Insiders Sell US$4.0m Of Stock, Possibly Signalling Caution

Many Tri Pointe Homes, Inc. (NYSE:TPH) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Tri Pointe Homes

Tri Pointe Homes Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the CEO & Non-Independent Director, Douglas Bauer, sold US$2.7m worth of shares at a price of US$39.78 per share. That means that even when the share price was below the current price of US$42.62, an insider wanted to cash in some shares. 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 8.4% of Douglas Bauer's stake.

In the last year Tri Pointe Homes insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like Tri Pointe Homes better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Tri Pointe Homes Insiders Are Selling The Stock

The last three months saw significant insider selling at Tri Pointe Homes. In total, General Counsel & Secretary David Lee sold US$221k 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.

Insider Ownership Of Tri Pointe Homes

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Tri Pointe Homes insiders own about US$95m worth of shares. That equates to 2.4% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Tri Pointe Homes Tell Us?

An insider sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. On the plus side, Tri Pointe Homes makes money, and is growing profits. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd practice some caution before buying! 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. You'd be interested to know, that we found 1 warning sign for Tri Pointe Homes and we suggest you have a look.

But note: Tri Pointe 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.