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 before you buy or sell Equity Commonwealth (NYSE:EQC), you may well want to know whether insiders have been buying or selling.
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Colombia 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’.
The Last 12 Months Of Insider Transactions At Equity Commonwealth
Over the last year, we can see that the biggest insider sale was by James Lozier for US$180k worth of shares, at about US$30.01 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$31.74. While their view may have changed since they sold, this isn’t a particularly bullish sign. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. Please note, however, that this single sale was just 28.9% of James Lozier’s stake. The only individual insider seller over the last year was James Lozier.
You can see a visual depiction of insider transactions over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 1.4% of Equity Commonwealth shares, worth about US$53m. This level of insider ownership is good but just short of being particularly stand-out, but it certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Equity Commonwealth Tell Us?
It doesn’t really mean much that no insider has traded Equity Commonwealth shares in the last quarter. Our analysis of Equity Commonwealth insider transactions leaves us unenthusiastic. And usually insiders own more stock in the company, according to our data. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Equity Commonwealth.
Of course Equity Commonwealth 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 email@example.com.