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 shareholders might well want to know whether insiders have been buying or selling shares in Reed’s, Inc. (NYSEMKT:REED).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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.’
The Last 12 Months Of Insider Transactions At Reed’s
In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board John Bello bought US$1.0m worth of shares at a price of US$2.50 per share. We do like to see buying, but this purchase was made at well below the current price of US$3.37. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn’t tell us much about what they think of current prices.
In the last twelve months insiders purchased 574k shares for US$1.4m. But insiders sold 291k shares worth US$664k. In the last twelve months there was more buying than selling by Reed’s insiders. You can see the insider transactions (by 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Reed’s Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Reed’s. In total, Corporate Secretary Judy Reed sold US$302k worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does Reed’s Boast High Insider Ownership?
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. It appears that Reed’s insiders own 13% of the company, worth about US$15m. 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 Reed’s Tell Us?
An insider sold Reed’s shares recently, but they didn’t buy any. In contrast, they appear keener if you look at the last twelve months. It’s good to see insiders are shareholders. So we’re happy enough to look past some selling. 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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.