It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Hersha Hospitality Trust (NYSE:HT), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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, such insiders must disclose their trading activities, and not trade on inside information.
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. 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’.
Check out our latest analysis for Hersha Hospitality Trust
Hersha Hospitality Trust Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Chairman of the Board Hasu Shah for US$253k worth of shares, at about US$17.48 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$17.68. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. We note that the biggest single sale was only 6.9% of Hasu Shah’s holding.
Over the last year, we can see that insiders have bought 20.94k shares worth US$359k. On the other hand they divested 29.50k shares, for US$586k. All up, insiders sold more shares in Hersha Hospitality Trust than they bought, over the last year. The average sell price was around US$19.88. 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. 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 like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Hersha Hospitality Trust Have Bought Stock Recently
At Hersha Hospitality Trust,over the last quarter, we have observed quite a lot more insider buying than insider selling. 5 insiders bought US$234k worth of shares. But Thomas Hutchison sold shares worth US$113k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.
Does Hersha Hospitality Trust Boast High Insider Ownership?
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. Hersha Hospitality Trust insiders own about US$29m worth of shares (which is 3.7% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Hersha Hospitality Trust Tell Us?
It is good to see recent purchasing. On the other hand the transaction history, over the last year, isn’t so positive. We don’t take much heart from transactions by Hersha Hospitality Trust insiders over the last year. But they own a reasonable amount of the company, and there was some buying recently. Overall they seem reasonably aligned. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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 editorial-team@simplywallst.com.