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 we'll take a look at whether insiders have been buying or selling shares in The GEO Group, Inc. (NYSE:GEO).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
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'.
GEO Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Founder George Zoley for US$4.5m worth of shares, at about US$16.96 per share. That means that an insider was happy to buy shares at above the current price of US$8.84. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Happily, we note that in the last year insiders paid US$13m for 881.49k shares. On the other hand they divested 8.44k shares, for US$101k. Overall, GEO Group insiders were net buyers during the last year. They paid about US$14.45 on average. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Does GEO Group Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. It appears that GEO Group insiders own 3.3% of the company, worth about US$34m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About GEO Group Insiders?
The fact that there have been no GEO Group insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders own shares in GEO Group and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing GEO Group. Our analysis shows 2 warning signs for GEO Group (1 is a bit unpleasant!) and we strongly recommend you look at them before investing.
But note: GEO Group 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. We currently account for open market transactions and private dispositions, but not derivative transactions.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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