We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Avery Dennison Corporation (NYSE:AVY).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
The Last 12 Months Of Insider Transactions At Avery Dennison
Over the last year, we can see that the biggest insider sale was by the President of Label & Graphic Materials, Georges Gravanis, for US$1.5m worth of shares, at about US$111 per share. That means that even when the share price was below the current price of US$116, 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. However, while insider selling is sometimes discouraging, it’s only a weak signal. It is worth noting that this sale was 50.2% of Georges Gravanis’s holding.
We note that in the last year insiders divested 28275 shares for a total of US$3.1m. Avery Dennison insiders didn’t buy any shares over the last year. You can see the insider transactions (by 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Avery Dennison Have Sold Stock Recently
The last three months saw significant insider selling at Avery Dennison. Specifically, Georges Gravanis ditched US$1.5m worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Does Avery Dennison 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 0.7% of Avery Dennison shares, worth about US$65m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Avery Dennison Insiders?
An insider sold Avery Dennison shares recently, but they didn’t buy any. Looking to the last twelve months, our data doesn’t show any insider buying. But since Avery Dennison is profitable and growing, we’re not too worried by this. While insiders do own shares, they don’t own a heap, and they have been selling. So we’d only buy after careful consideration. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Avery Dennison 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.