We often see insiders buying up shares in companies that perform well over the long term. 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 we’ll take a look at whether insiders have been buying or selling shares in Medical Properties Trust, Inc. (NYSE:MPW).
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.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
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The Last 12 Months Of Insider Transactions At Medical Properties Trust
In the last twelve months, the biggest single sale by an insider was when Chairman Edward Aldag sold US$6.1m worth of shares at a price of US$12.41 per share. That means that even when the share price was below the current price of US$16.41, an insider wanted to cash in some shares. While their view may have changed since they sold, this isn’t a particularly bullish sign. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. Please note, however, that this single sale was just 20.7% of Edward Aldag’s stake.
All up, insiders sold more shares in Medical Properties Trust than they bought, over the last year. The average sell price was around US$13.42. It’s not particularly great to see insiders were selling shares at below recent prices. 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 individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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Medical Properties Trust Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Medical Properties Trust shares. In total, insiders sold US$1.7m 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 Medical Properties Trust
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Medical Properties Trust insiders own about US$77m worth of shares. That equates to 1.3% 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.
So What Do The Medical Properties Trust Insider Transactions Indicate?
Insiders sold stock recently, but they haven’t been buying. Zooming out, the longer term picture doesn’t give us much comfort. But since Medical Properties Trust is profitable and growing, we’re not too worried by this. Insiders own shares, but we’re still pretty cautious, given the history of sales. So we’d only buy after careful consideration. 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 Medical Properties Trust may not be the best stock to buy. So you may wish to see this free collection of high quality 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 firstname.lastname@example.org.