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 MFA Financial, Inc. (NYSE:MFA), 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, 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 equally, we would consider it foolish to ignore insider transactions altogether. 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'.
MFA Financial Insider Transactions Over The Last Year
The Co-Chief Investment Officer Bryan Wulfsohn made the biggest insider purchase in the last 12 months. That single transaction was for US$101k worth of shares at a price of US$2.69 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$4.03. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
MFA Financial insiders may have bought shares in the last year, but they didn't sell any. Their average price was about US$3.64. Although they bought at below the recent share price, it is good to see that insiders are willing to invest in the company. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
MFA Financial is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does MFA Financial Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. MFA Financial insiders own about US$15m worth of shares. That equates to 0.8% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The MFA Financial Insider Transactions Indicate?
The fact that there have been no MFA Financial insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Overall we don't see anything to make us think MFA Financial insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 3 warning signs for MFA Financial (of which 2 are concerning!) you should know about.
But note: MFA Financial 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, but not derivative transactions.
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