We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Rambus Inc. (NASDAQ:RMBS).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 Rambus
The Independent Director, Eric Stang, made the biggest insider sale in the last 12 months. That single transaction was for US$258k worth of shares at a price of US$14.74 each. That means that an insider was selling shares at slightly below the current price (US$19.08). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 30% of Eric Stang's holding. Eric Stang was the only individual insider to sell shares in the last twelve months.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Rambus better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Rambus Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 0.4% of Rambus shares, worth about US$8.6m, according to our data. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
What Might The Insider Transactions At Rambus Tell Us?
The fact that there have been no Rambus insider transactions recently certainly doesn't bother us. The insider transactions at Rambus are not inspiring us to buy. And usually insiders own more stock in the company, according to our data. Of course, the future is what matters most. So if you are interested in Rambus, you should check out this free report on analyst forecasts for the company.
Of course Rambus 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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