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.
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At Realty Income
In the last twelve months, the biggest single sale by an insider was when John Case sold US$2.0m worth of shares at a price of US$57.70 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$71.79. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. As a general rule we consider it to be discouraging when insiders are selling below the current price. It is worth noting that this sale was only 18% of John Case’s holding.
We note that in the last year insiders divested 93.07k shares for a total of US$5.4m. All up, insiders sold more shares in Realty Income than they bought, over the last year. The sellers received a price of around US$57.51, on average. It’s not particularly great to see insiders were selling shares around current prices. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.2% of Realty Income shares, worth about US$52m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Do The Realty Income Insider Transactions Indicate?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. We don’t take much encouragement from the transactions by Realty Income insiders. The modest level of insider ownership is, at least, some comfort. 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.