We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Archer-Daniels-Midland Company (NYSE:ADM).
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
Archer-Daniels-Midland Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Senior VP and President of Global Business Readiness & Global Procurement, Joseph Taets, sold US$1.5m worth of shares at a price of US$50.15 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$56.58. 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 14% of Joseph Taets's holding.
In the last twelve months insiders purchased 14.57k shares for US$632k. On the other hand they divested 54.73k shares, for US$2.6m. All up, insiders sold more shares in Archer-Daniels-Midland than they bought, over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Archer-Daniels-Midland
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Archer-Daniels-Midland insiders own about US$135m worth of shares (which is 0.4% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Archer-Daniels-Midland Insiders?
It doesn't really mean much that no insider has traded Archer-Daniels-Midland shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Archer-Daniels-Midland insiders selling. 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 assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Archer-Daniels-Midland.
Of course Archer-Daniels-Midland may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
When trading Archer-Daniels-Midland or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.