It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Stitch Fix, Inc. (NASDAQ:SFIX).
What Is Insider Selling?
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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. 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'.
Stitch Fix Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Independent Director John Gurley bought US$3.2m worth of shares at a price of US$13.26 per share. We do like to see buying, but this purchase was made at well below the current price of US$66.88. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Stitch Fix is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Stitch Fix
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Stitch Fix insiders own 15% of the company, worth about US$1.1b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Stitch Fix Tell Us?
The fact that there have been no Stitch Fix insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Stitch Fix insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Stitch Fix. Every company has risks, and we've spotted 2 warning signs for Stitch Fix you should know about.
Of course Stitch Fix 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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