It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Markel Corporation (NYSE:MKL), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
The Last 12 Months Of Insider Transactions At Markel
Over the last year, we can see that the biggest insider sale was by the Lead Independent Director, Stewart Kasen, for US$1.9m worth of shares, at about US$967 per share. That means that even when the share price was slightly below the current price of US$982, 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. 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 34% of Stewart Kasen's holding.
In total, Markel insiders sold more than they bought over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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Insiders at Markel Have Sold Stock Recently
The last three months saw significant insider selling at Markel. In total, Lead Independent Director Stewart Kasen dumped US$1.9m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
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. Markel insiders own 2.4% of the company, currently worth about US$322m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Markel Insider Transactions Indicate?
An insider hasn't bought Markel stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn't bring confidence, either. It is good to see high insider ownership, but the insider selling leaves us cautious. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Markel. At Simply Wall St, we found 1 warning sign for Markel that deserve your attention before buying any shares.
But note: Markel 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, but not derivative transactions.
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Markel Corporation, a diverse financial holding company, markets and underwrites specialty insurance products in the United States, Bermuda, the United Kingdom, rest of Europe, Canada, the Asia Pacific, and the Middle East.
Reasonable growth potential with mediocre balance sheet.