We often see insiders buying up shares in companies that perform well over the long term. 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 Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX).
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, 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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Crinetics Pharmaceuticals Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Founder, R. Struthers, for US$521k worth of shares, at about US$15.30 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$16.49. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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. We note that the biggest single sale was only 2.9% of R. Struthers's holding. R. Struthers was the only individual insider to sell shares in the last twelve months. Notably R. Struthers was also the biggest buyer, having purchased US$65k worth of shares.
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!
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).
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. 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 appears that Crinetics Pharmaceuticals insiders own 4.4% of the company, worth about US$24m. 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 Crinetics Pharmaceuticals Insiders?
It doesn't really mean much that no insider has traded Crinetics Pharmaceuticals shares in the last quarter. Our analysis of Crinetics Pharmaceuticals insider transactions leaves us cautious. The modest level of insider ownership is, at least, some comfort. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Crinetics Pharmaceuticals. For example, Crinetics Pharmaceuticals has 4 warning signs (and 2 which are concerning) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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