It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we’ll take a look at whether insiders have been buying or selling shares in Superior Drilling Products, Inc. (NYSEMKT:SDPI).
Do Insider Transactions Matter?
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.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
Superior Drilling Products Insider Transactions Over The Last Year
The insider Reid Walker made the biggest insider purchase in the last 12 months. That single transaction was for US$739k worth of shares at a price of US$0.65 each. That means that even when the share price was higher than US$0.35 (the recent price), an insider wanted to purchase shares. 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. To us, it’s very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels. We note that Reid Walker was both the biggest buyer and the biggest seller.
Over the last year, we can see that insiders have bought 1.15m shares worth US$748k. On the other hand they divested 62.41k shares, for US$31k. In the last twelve months there was more buying than selling by Superior Drilling Products insiders. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
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. It appears that Superior Drilling Products insiders own 25% of the company, worth about US$2.3m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Superior Drilling Products Tell Us?
It doesn’t really mean much that no insider has traded Superior Drilling Products shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Overall we don’t see anything to make us think Superior Drilling Products insiders are doubting the company, and they do own shares. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Superior Drilling Products. At Simply Wall St, we’ve found that Superior Drilling Products has 4 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.
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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