We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in LPL Financial Holdings Inc. (NASDAQ:LPLA).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
LPL Financial Holdings Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the MD & Divisional President of Business Development, Richard Steinmeier, sold US$466k worth of shares at a price of US$86.02 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$117. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was 100% of Richard Steinmeier's holding. Richard Steinmeier was the only individual insider to sell shares in the last twelve months.
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).
Does LPL Financial Holdings Boast High Insider Ownership?
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. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that LPL Financial Holdings insiders own 0.9% of the company, worth about US$82m. 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 LPL Financial Holdings Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. We don't take much encouragement from the transactions by LPL Financial Holdings insiders. But we do like the fact that insiders own a fair chunk of the company. 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 LPL Financial Holdings has 2 warning signs and it would be unwise to ignore them.
Of course LPL Financial Holdings 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, but not derivative transactions.
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