We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell PriceSmart, Inc. (NASDAQ:PSMT), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
PriceSmart Insider Transactions Over The Last Year
The CEO & Director, Sherry Bahrambeygui, made the biggest insider sale in the last 12 months. That single transaction was for US$1.0m worth of shares at a price of US$101 each. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. The good news is that this large sale was at well above current price of US$87.12. So it is hard to draw any strong conclusion from it.
PriceSmart insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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 of PriceSmart
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. PriceSmart insiders own about US$245m worth of shares (which is 9.3% of the company). 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 Do The PriceSmart Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. While we feel good about high insider ownership of PriceSmart, we can't say the same about the selling of shares. Of course, the future is what matters most. So if you are interested in PriceSmart, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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, but not derivative transactions.
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