Don't Ignore The Insider Selling In First American Financial

Some First American Financial Corporation (NYSE:FAF) shareholders may be a little concerned to see that the Independent Director, James Doti, recently sold a substantial US$501k worth of stock at a price of US$65.17 per share. That's a big disposal, and it decreased their holding size by 10%, which is notable but not too bad.

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The Last 12 Months Of Insider Transactions At First American Financial

The Executive Chairman of the Board, Dennis Gilmore, made the biggest insider sale in the last 12 months. That single transaction was for US$7.1m worth of shares at a price of US$64.13 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$66.00. 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. It is worth noting that this sale was only 19% of Dennis Gilmore's holding.

In the last year First American Financial insiders didn't buy any company stock. 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!

View our latest analysis for First American Financial

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Does First American Financial Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. First American Financial insiders own about US$248m worth of shares (which is 3.7% 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 First American Financial Tell Us?

Insiders sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. At Simply Wall St, we found 2 warning signs for First American Financial that deserve your attention before buying any shares.

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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.