We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Residential (NYSE:EQR), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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, most countries require that the company discloses such transactions to the market.
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. 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 Equity Residential
Over the last year, we can see that the biggest insider sale was by Executive VP & Chief Investment Officer Alan George for US$2.0m worth of shares, at about US$64.00 per share. That means that even when the share price was below the current price of US$75.69, an insider wanted to cash in some shares. While their view may have changed since they sold, this isn’t a particularly bullish sign. When an insider sells below the current price, it does tend to make us wonder about the current valuation. It is worth noting that this sale was only 36.1% of Alan George’s holding.
We note that in the last year insiders divested 70.20k shares for a total of US$4.6m. In total, Equity Residential insiders sold more than they bought over the last year. The average sell price was around US$66.22. It’s not particularly great to see insiders were selling shares around current prices. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Equity Residential better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Equity Residential Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Equity Residential shares. Specifically, insiders ditched US$938k worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Insider Ownership of Equity Residential
Many investors like to check how much of a company is owned by insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Equity Residential insiders own 1.1% of the company, currently worth about US$329m based on the recent share price. 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 Equity Residential Insider Transactions Indicate?
Insiders sold Equity Residential shares recently, but they didn’t buy any. Looking to the last twelve months, our data doesn’t show any insider buying. But it is good to see that Equity Residential is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in Equity Residential, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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