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 we'll take a look at whether insiders have been buying or selling shares in New Senior Investment Group Inc. (NYSE:SNR).
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 in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At New Senior Investment Group
In the last twelve months, the biggest single purchase by an insider was when Independent Chairman Robert Savage bought US$636k worth of shares at a price of US$6.40 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$5.45). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
While New Senior Investment Group insiders bought shares during the last year, they didn't sell. The average buy price was around US$5.49. I'd consider this a positive as it suggests insiders see value at around the current price. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of New Senior Investment Group
Many investors like to check how much of a company is owned by 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. Insiders own 6.8% of New Senior Investment Group shares, worth about US$31m. 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 Does This Data Suggest About New Senior Investment Group Insiders?
It doesn't really mean much that no insider has traded New Senior Investment Group shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in New Senior Investment Group and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing New Senior Investment Group. In terms of investment risks, we've identified 3 warning signs with New Senior Investment Group and understanding these should be part of your investment process.
But note: New Senior Investment Group may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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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