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 Realty Income Corporation (NYSE:O), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
The Last 12 Months Of Insider Transactions At Realty Income
Over the last year, we can see that the biggest insider sale was by the , John Case, for US$2.0m worth of shares, at about US$57.70 per share. That means that even when the share price was below the current price of US$68.74, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it’s only a weak signal. This single sale was just 18% of John Case’s stake.
We note that in the last year insiders divested 109k shares for a total of US$6.5m. Realty Income insiders didn’t buy any shares over the last year. You can see a visual depiction of insider transactions (by 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!
Insiders at Realty Income Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at Realty Income. In total, insiders sold US$1.4m 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 insiders think that the shares are a bargain.
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It appears that Realty Income insiders own 0.2% of the company, worth about US$51m. 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 Realty Income Insider Transactions Indicate?
Insiders sold Realty Income shares recently, but they didn’t buy any. Looking to the last twelve months, our data doesn’t show any insider buying. But since Realty Income is profitable and growing, we’re not too worried by this. While insiders do own shares, they don’t own a heap, and they have been selling. 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.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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