Possible Bearish Signals With NMI Holdings Insiders Disposing Stock

In the last year, many NMI Holdings, Inc. (NASDAQ:NMIH) insiders sold a substantial stake in the company which may have sparked shareholders' attention. 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, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for NMI Holdings

NMI Holdings Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, James Jones, for US$1.7m worth of shares, at about US$30.16 per share. That means that an insider was selling shares at slightly below the current price (US$39.39). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 34% of James Jones's stake.

In the last year NMI Holdings insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

I will like NMI Holdings 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.

NMI Holdings Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at NMI Holdings. In total, insiders dumped US$2.2m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership Of NMI Holdings

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 1.5% of NMI Holdings shares, worth about US$48m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About NMI Holdings Insiders?

Insiders haven't bought NMI Holdings stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. But since NMI Holdings is profitable and growing, we're not too worried by this. 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. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of NMI Holdings.

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 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.