We often see insiders buying up shares in companies that perform well over the long term. 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 Ready Capital Corporation (NYSE:RC), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Ready Capital
Over the last year, we can see that the biggest insider purchase was by Chairman & CEO Thomas Capasse for US$366k worth of shares, at about US$10.18 per share. That means that an insider was happy to buy shares at around the current price of US$11.81. 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. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. In this case we're pleased to report that the insider purchases were made at close to current prices.
While Ready Capital insiders bought shares during the last year, they didn't sell. The average buy price was around US$8.42. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. 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!
Ready Capital is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Ready Capital
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. Insiders own 1.7% of Ready Capital shares, worth about US$11m. 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 Ready Capital Insider Transactions Indicate?
The fact that there have been no Ready Capital insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Ready Capital and we see no evidence to suggest they are worried about the future. 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 that end, you should learn about the 4 warning signs we've spotted with Ready Capital (including 2 which make us uncomfortable).
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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