We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in WD-40 Company (NASDAQ:WDFC).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Colombia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
The Last 12 Months Of Insider Transactions At WD-40
Chief Strategy Officer Michael Freeman made the biggest insider sale in the last 12 months. That single transaction was for US$1.0m worth of shares at a price of US$167 each. That means that an insider was selling shares at below the current price (US$171). While sellers have a variety of reasons for selling, this isn’t particularly great to see. As a general rule we consider it to be discouraging when insiders are selling below the current price. Please note, however, that this single sale was just 43.6% of Michael Freeman’s stake.
All up, insiders sold more shares in WD-40 than they bought, over the last year. They sold for an average price of about US$162. We don’t gain confidence from insider selling below the recent share price. But we wouldn’t put too much weight on the insider selling. The chart below shows insider transactions 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!
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WD-40 Insiders Are Selling The Stock
The last three months saw significant insider selling at WD-40. In total, insiders sold US$2.3m worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Insider Ownership of WD-40
Many investors like to check how much of a company is owned by insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It’s great to see that WD-40 insiders own 3.0% of the company, worth about US$72m. 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 Do The WD-40 Insider Transactions Indicate?
Insiders haven’t bought WD-40 stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn’t bring confidence, either. But since WD-40 is profitable and growing, we’re not too worried by this. Insiders own shares, but we’re still pretty cautious, given the history of sales. We’re in no rush to buy! Of course, the future is what matters most. So if you are interested in WD-40, you should check out this free report on analyst forecasts for the company.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.