We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Darling Ingredients Inc. (NYSE:DAR), 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, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. 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'.
The Last 12 Months Of Insider Transactions At Darling Ingredients
The Executive VP of Specialty Ingredients & Chief Strategy Officer, John Bullock, made the biggest insider sale in the last 12 months. That single transaction was for US$3.4m worth of shares at a price of US$45.79 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$47.99. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 35% of John Bullock's holding.
In the last twelve months insiders purchased 16.50k shares for US$246k. But they sold 343.39k shares for US$14m. All up, insiders sold more shares in Darling Ingredients than they bought, over the last year. The average sell price was around US$39.61. It's not particularly great to see insiders were selling shares at below recent prices. Since insiders sell for many reasons, we wouldn't put too much weight on it. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Darling Ingredients better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Darling Ingredients Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Darling Ingredients shares over the last three months. In total, insiders sold US$9.3m worth of shares in that time. On the flip side, Independent Director Charles Adair spent US$23k on purchasing shares. Generally this level of net selling might be considered a bit bearish.
Does Darling Ingredients Boast High Insider Ownership?
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. Darling Ingredients insiders own about US$115m worth of shares (which is 1.5% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Darling Ingredients Insiders?
The insider sales have outweighed the insider buying, at Darling Ingredients, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. But since Darling Ingredients is profitable and growing, we're not too worried by this. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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 (1 is significant!) that you ought to be aware of before buying any shares in Darling Ingredients.
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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