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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Allergan plc (NYSE:AGN).
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 don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Allergan
In the last twelve months, the biggest single sale by an insider was when Executive VP & Chief Commercial Officer William Meury sold US$5.7m worth of shares at a price of US$165 per share. So we know that an insider sold shares at around the present share price of US$139. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We generally tread carefully if insiders have been selling on market, even if they sold slightly above the current price.
Over the last year, we can see that insiders have bought 21.10k shares worth US$3.7m. But they sold 36.32k for US$5.9m. Over the last year we saw more insider selling of Allergan shares, than buying. They sold for an average price of about US$164. We don’t gain much confidence from insider selling near the recent share price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Allergan Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Allergan. We can see that Executive VP & CFO Matthew Walsh paid US$157k for shares in the company. No-one sold. That shows some optimism about the company’s future.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. It’s great to see that Allergan insiders own 0.3% of the company, worth about US$124m. 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 Allergan Insider Transactions Indicate?
The recent insider purchase is heartening. On the other hand the transaction history, over the last year, isn’t so positive. The high levels of insider ownership, and the recent buying by an insider, suggests they are well aligned and optimistic. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Allergan.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 email@example.com.