We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. 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?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
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. 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'.
The Last 12 Months Of Insider Transactions At MFA Financial
In the last twelve months, the biggest single sale by an insider was when the Co-Chief Investment Officer, Bryan Wulfsohn, sold US$912k worth of shares at a price of US$7.72 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The good news is that this large sale was at well above current price of US$3.04. So it is hard to draw any strong conclusion from it. Notably Bryan Wulfsohn was also the biggest buyer, having purchased US$191k worth of shares.
In the last twelve months insiders purchased 52.50k shares for US$191k. But they sold 143.01k shares for US$1.1m. In total, MFA Financial insiders sold more than they bought over the last year. The average sell price was around US$7.70. Insider selling doesn't make us excited to buy. But we note that the selling, on average, was at well above the recently traded price of US$3.04. 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!
I will like MFA Financial better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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. I reckon it's a good sign if insiders own a significant number of shares in the company. MFA Financial insiders own about US$11m worth of shares. That equates to 0.8% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About MFA Financial Insiders?
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 MFA Financial insiders. But it's good to see that insiders own shares in 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. To help with this, we've discovered 3 warning signs (2 shouldn't be ignored!) that you ought to be aware of before buying any shares in MFA Financial.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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