We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in NewMarket Corporation (NYSE:NEU).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At NewMarket
Over the last year, we can see that the biggest insider sale was by Chairman Thomas Gottwald for US$4.8m worth of shares, at about US$441 per share. That means that an insider was selling shares at around the current price of US$432. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. We generally tread carefully if insiders have been selling on market, even if they sold slightly above the current price.
All up, insiders sold more shares in NewMarket than they bought, over the last year. They sold for an average price of about US$438. It’s not particularly great to see insiders were selling shares at below recent prices. But we wouldn’t put too much weight on the insider selling. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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NewMarket Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at NewMarket. In total, insiders dumped US$5.0m 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 directors think that the shares are a bargain.
Does NewMarket Boast High Insider Ownership?
Many investors like to check how much of a company is owned by 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. NewMarket insiders own 34% of the company, currently worth about US$1.6b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About NewMarket Insiders?
Insiders haven’t bought NewMarket stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. But since NewMarket is profitable and growing, we’re not too worried by this. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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