We wouldn't blame The Howard Hughes Corporation (NYSE:HHC) shareholders if they were a little worried about the fact that Allen Model, the Independent Director recently netted about US$747k selling shares at an average price of US$80.11. That sale reduced their total holding by 36% which is hardly insignificant, but far from the worst we've seen.
The Last 12 Months Of Insider Transactions At Howard Hughes
Over the last year, we can see that the biggest insider sale was by the Senior Executive VP, Peter Riley, for US$856k worth of shares, at about US$58.50 per share. That means that an insider was selling shares at slightly below the current price (US$78.93). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 26% of Peter Riley's holding.
In the last twelve months insiders purchased 22.87k shares for US$1.5m. But insiders sold 23.96k shares worth US$1.6m. Over the last year we saw more insider selling of Howard Hughes shares, than buying. They sold for an average price of about US$66.91. We don't gain confidence from insider selling below the recent share price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn't jump to conclusions. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Howard Hughes better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Howard Hughes insiders own 3.7% of the company, worth about US$160m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Howard Hughes Insider Transactions Indicate?
An insider sold Howard Hughes shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Our analysis shows 4 warning signs for Howard Hughes (1 shouldn't be ignored!) and we strongly recommend you look at them before investing.
But note: Howard Hughes 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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