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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Allergan plc (NYSE:AGN), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
Allergan Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Lead Independent Director Christopher Coughlin for US$1.9m worth of shares, at about US$191 per share. That means that an insider was happy to buy shares at above the current price of US$130. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Over the last year, we can see that insiders have bought 14760 shares worth US$2.7m. But insiders sold 1055 shares worth US$201k. In the last twelve months there was more buying than selling by Allergan insiders. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Allergan is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Allergan Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Allergan insiders own about US$110m worth of shares (which is 0.3% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Allergan Insiders?
The fact that there have been no Allergan insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. It would be great to see more insider buying, but overall it seems like Allergan insiders are reasonably well aligned (owning significant chunk of the company’s shares) and optimistic for the future. Of course, the future is what matters most. So if you are interested in Allergan, you should check out this free report on analyst forecasts for the company.
But note: Allergan 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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.