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 we'll take a look at whether insiders have been buying or selling shares in Edwards Lifesciences Corporation (NYSE:EW).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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'.
Edwards Lifesciences Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Corporate Vice President of Strategy & Corporate Development, Donald Bobo, sold US$927k worth of shares at a price of US$77.28 per share. That means that an insider was selling shares at slightly below the current price (US$83.84). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 5.6% of Donald Bobo's holding. Donald Bobo was the only individual insider to sell shares in the last twelve months.
Donald Bobo ditched 19.77k shares over the year. The average price per share was US$79.91. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Does Edwards Lifesciences Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Edwards Lifesciences insiders own about US$405m worth of shares (which is 0.8% 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.
What Might The Insider Transactions At Edwards Lifesciences Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Edwards Lifesciences insiders selling. 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. For example - Edwards Lifesciences has 1 warning sign we think you should be aware of.
Of course Edwards Lifesciences 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.
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