Read This Before Selling Compass Diversified (NYSE:CODI) Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Compass Diversified (NYSE:CODI).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

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. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

View our latest analysis for Compass Diversified

Compass Diversified Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Independent Chairman of the Board C. Day bought US$120k worth of shares at a price of US$19.61 per share. That means that an insider was happy to buy shares at around the current price of US$24.00. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. The good news for Compass Diversified share holders is that insiders were buying at near the current price.

Over the last year, we can see that insiders have bought 46.82k shares worth US$875k. But insiders sold 5.56k shares worth US$100k. Overall, Compass Diversified insiders were net buyers during 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!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Compass Diversified Insiders Bought Stock Recently

Over the last quarter, Compass Diversified insiders have spent a meaningful amount on shares. Overall, seven insiders shelled out US$717k for shares in the company -- and none sold. This is a positive in our book as it implies some confidence.

Insider Ownership of Compass Diversified

Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Compass Diversified insiders own about US$40m worth of shares. That equates to 2.6% 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.

So What Does This Data Suggest About Compass Diversified Insiders?

It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Compass Diversified insiders are well aligned, and that they may think the share price is too low. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Compass Diversified. Case in point: We've spotted 3 warning signs for Compass Diversified you should be aware of, and 2 of them shouldn't be ignored.

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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This article by Simply Wall St is general in nature. 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.
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