We often see insiders buying up shares in companies that perform well over the long term. 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 we’ll take a look at whether insiders have been buying or selling shares in Investors Title Company (NASDAQ:ITIC).
What Is Insider Selling?
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.
We don’t think shareholders should simply follow insider transactions. 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.’
The Last 12 Months Of Insider Transactions At Investors Title
In the last twelve months, the biggest single sale by an insider was when the President, James Fine, sold US$154k worth of shares at a price of US$156 per share. That means that even when the share price was below the current price of US$161, an insider wanted to cash in some shares. 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 1.2% of James Fine’s holding. James Fine was the only individual insider to sell shares in the last twelve months.
You can see the insider transactions (by 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!
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).
For a common shareholder, it is worth checking how many shares are held by company 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. It appears that Investors Title insiders own 24% of the company, worth about US$72m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Investors Title Insiders?
An insider sold Investors Title shares recently, but they didn’t buy any. And there weren’t any purchases to give us comfort, over the last year. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’d think twice before buying! Along with insider transactions, I recommend checking if Investors Title is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course Investors Title may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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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.