We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Packaging Corporation of America (NYSE:PKG).
What Is Insider Selling?
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 don't think shareholders should simply follow insider transactions. 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 Packaging Corporation of America
The Senior VP & Chief Information Officer, Robert Schneider, made the biggest insider sale in the last 12 months. That single transaction was for US$2.0m worth of shares at a price of US$134 each. That means that an insider was selling shares at below the current price (US$135). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower 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 31% of Robert Schneider's holding.
Insiders in Packaging Corporation of America didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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Packaging Corporation of America Insiders Are Selling The Stock
The last three months saw significant insider selling at Packaging Corporation of America. In total, Senior VP Kent Pflederer dumped US$677k 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.
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. It's great to see that Packaging Corporation of America insiders own 1.6% of the company, worth about US$201m. 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 Packaging Corporation of America Insider Transactions Indicate?
An insider hasn't bought Packaging Corporation of America stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To assist with this, we've discovered 3 warning signs that you should run your eye over to get a better picture of Packaging Corporation of America.
Of course Packaging Corporation of America may not be the best stock to buy. So you may wish to see this free collection of high quality 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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