Possible Bearish Signals With Palomar Holdings Insiders Disposing Stock

Over the past year, many Palomar Holdings, Inc. (NASDAQ:PLMR) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Palomar Holdings

The Last 12 Months Of Insider Transactions At Palomar Holdings

Notably, that recent sale by Founder D. Armstrong was not the only time they sold Palomar Holdings shares this year. They previously made an even bigger sale of -US$1.1m worth of shares at a price of US$92.83 per share. That means that even when the share price was below the current price of US$99.04, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent 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 2.4% of D. Armstrong's holding.

Over the last year we saw more insider selling of Palomar Holdings shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

Palomar Holdings Insiders Are Selling The Stock

Over the last three months, we've seen notably more insider selling, than insider buying, at Palomar Holdings. In total, insiders sold US$3.0m worth of shares in that time. On the other hand we note Independent Director Thomas Bradley bought US$89k worth of shares. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.

Insider Ownership Of Palomar Holdings

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Palomar Holdings insiders own 2.5% of the company, worth about US$64m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Palomar Holdings Tell Us?

The stark truth for Palomar Holdings is that there has been more insider selling than insider buying in the last three months. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Palomar Holdings is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Palomar Holdings has 2 warning signs and it would be unwise to ignore these.

But note: Palomar Holdings 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.

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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.