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 before you buy or sell Verastem, Inc. (NASDAQ:VSTM), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Verastem
President Robert Forrester made the biggest insider purchase in the last 12 months. That single transaction was for US$74k worth of shares at a price of US$7.00 each. That means that even when the share price was higher, an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. That purchase may suggest an expectation of positive returns over the long term.
Happily, we note that in the last year insiders bought 41.20k shares for a total of US$281k. In total, Verastem insiders bought more than they sold over the last year. They paid about US$6.82 on average. I’d consider this a positive as it suggests insiders see value at around the current price, which is US$4.13. The chart below shows insider transactions over the last year. 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 alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Verastem Have Bought Stock Recently
Over the last quarter, Verastem insiders have spent a meaningful amount on shares. In total, insiders bought US$218k worth of shares in that time, and we didn’t record any sales whatsoever. This makes one think the business has some good points.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Verastem insiders own 3.3% of the company, currently worth about US$11m 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 Do The Verastem Insider Transactions Indicate?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss last year, which makes us a little cautious. Insiders likely see value in Verastem shares, given these transactions (along with notable insider ownership of the company). Of course, the future is what matters most. So if you are interested in Verastem, you should check out this free report on analyst forecasts for the company.
Of course Verastem may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.