First American Financial Insiders Sell US$11m Of Stock, Possibly Signalling Caution

The fact that multiple First American Financial Corporation (NYSE:FAF) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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The Last 12 Months Of Insider Transactions At First American Financial

Over the last year, we can see that the biggest insider sale was by the Executive Chairman of the Board, Dennis Gilmore, for US$7.1m worth of shares, at about US$64.13 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (US$55.63). So it is hard to draw any strong conclusion from it.

Insiders in First American Financial didn't buy any shares in the last year. 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!

Check out our latest analysis for First American Financial

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First American Financial Insiders Are Selling The Stock

The last quarter saw substantial insider selling of First American Financial shares. In total, insiders sold US$2.6m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership Of First American Financial

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. First American Financial insiders own about US$209m worth of shares (which is 3.7% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At First American Financial Tell Us?

Insiders haven't bought First American Financial stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. It is good to see high insider ownership, but the insider selling leaves us cautious. 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. For example - First American Financial has 3 warning signs we think you should be aware of.

But note: First American Financial 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.