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 Invitation Homes Inc. (NYSE:INVH), you may well want to know whether insiders have been buying or selling.
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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia 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'.
Invitation Homes Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Co-Founder, Dallas Tanner, for US$2.4m worth of shares, at about US$29.58 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$30.24. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 25% of Dallas Tanner's holding.
Insiders in Invitation Homes didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Invitation Homes Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Invitation Homes. In total, Chairperson of the Board Bryce Blair sold US$1.5m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Invitation Homes 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Invitation Homes insiders own about US$47m worth of shares. That equates to 0.3% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Invitation Homes Tell Us?
An insider hasn't bought Invitation Homes stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. On the plus side, Invitation Homes makes money, and is growing profits. While insiders do own shares, they don't own a heap, and they have been selling. We'd practice some caution before buying! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Invitation Homes. Every company has risks, and we've spotted 5 warning signs for Invitation Homes (of which 1 doesn't sit too well with us!) you should know about.
Of course Invitation Homes may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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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