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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 PennyMac Mortgage Investment Trust (NYSE:PMT), 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, rules govern insider transactions, and certain disclosures are required.
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.’
PennyMac Mortgage Investment Trust Insider Transactions Over The Last Year
The CEO, President & Trustee, David Spector, made the biggest insider sale in the last 12 months. That single transaction was for US$721k worth of shares at a price of US$20.61 each. That means that an insider was selling shares at below the current price (US$20.87). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it’s only a weak signal. We note that the biggest single sale was only 23.6% of David Spector’s holding.
Over the last year we saw more insider selling of PennyMac Mortgage Investment Trust shares, than buying. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at PennyMac Mortgage Investment Trust Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at PennyMac Mortgage Investment Trust. In total, David Spector dumped US$721k 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.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. PennyMac Mortgage Investment Trust insiders own about US$36m worth of shares. That equates to 2.5% 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 PennyMac Mortgage Investment Trust Insiders?
An insider sold stock recently, but they haven’t been buying. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. But since PennyMac Mortgage Investment Trust is profitable and growing, we’re not too worried by this. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. So we’d only buy after careful consideration. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.