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We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Alliance Data Systems Corporation (NYSE:ADS).
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, 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. 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.’
Alliance Data Systems Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Executive VP & Vice Chairman, Charles Horn, sold US$3.7m worth of shares at a price of US$235 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (US$150). So it may not tell us anything about how insiders feel about the current share price.
In the last twelve months insiders netted US$4.5m for 19459 shares sold. In the last year Alliance Data Systems insiders didn’t buy any company stock. 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!
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Alliance Data Systems insiders own 2.8% of the company, currently worth about US$218m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Alliance Data Systems Insider Transactions Indicate?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the Alliance Data Systems insiders selling. Of course, the future is what matters most. So if you are interested in Alliance Data Systems, you should check out this free report on analyst forecasts for the company.
Of course Alliance Data Systems 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.
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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.