It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Mercury General Corporation (NYSE:MCY).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
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 Columbia 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'.
Mercury General Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Executive Chairman of the Board George Joseph for US$6.0m worth of shares, at about US$37.80 per share. We do like to see buying, but this purchase was made at well below the current price of US$54.64. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
While Mercury General insiders bought shares during the last year, they didn't sell. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Mercury General is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Mercury General insiders own about US$1.5b worth of shares (which is 51% 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.
So What Does This Data Suggest About Mercury General Insiders?
The fact that there have been no Mercury General insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Mercury General insiders feel good about the company's future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For instance, we've identified 2 warning signs for Mercury General (1 shouldn't be ignored) you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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, but not derivative transactions.
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