It is not uncommon to see companies perform well in the years after insiders buy shares. 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 ResMed Inc. (NYSE:RMD).
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 on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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.’
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ResMed Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the , Raj Sodhi, for US$1.7m worth of shares, at about US$102 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$114. 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. This single sale was just 39.5% of Raj Sodhi’s stake.
In the last twelve months insiders netted US$2.6m for 25416 shares sold. In the last year ResMed insiders didn’t buy any company stock. 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Does ResMed 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. I reckon it’s a good sign if insiders own a significant number of shares in the company. ResMed insiders own 0.8% of the company, currently worth about US$138m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About ResMed Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. It’s heartening that insiders own plenty of stock, but we’d like to see more insider buying, since the last year of ResMed insider transactions don’t fill us with confidence. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for ResMed.
But note: ResMed may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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