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 shareholders might well want to know whether insiders have been buying or selling shares in Louisiana-Pacific Corporation (NYSE:LPX).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Louisiana-Pacific
The Independent Director, Kurt Landgraf, made the biggest insider sale in the last 12 months. That single transaction was for US$898k worth of shares at a price of US$30.60 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$67.21. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was 50% of Kurt Landgraf's holding.
Over the last year we saw more insider selling of Louisiana-Pacific shares, than buying. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Louisiana-Pacific Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Louisiana-Pacific shares. In total, Independent Director Lizanne Gottung dumped US$250k 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 Louisiana-Pacific
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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 0.7% of Louisiana-Pacific shares, worth about US$45m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Louisiana-Pacific Insiders?
An insider sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Louisiana-Pacific 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. 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. To that end, you should learn about the 2 warning signs we've spotted with Louisiana-Pacific (including 1 which is a bit concerning).
But note: Louisiana-Pacific 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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