It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Issuer Direct Corporation (NYSEMKT:ISDR).
What Is Insider Selling?
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'.
Issuer Direct Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Independent Director, James Galleher, sold US$244k worth of shares at a price of US$21.70 per share. So what is clear is that an insider saw fit to sell at around the current price of US$18.92. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive). Notably James Galleher was also the biggest buyer, having purchased US$19k worth of shares.
Over the last year, we can see that insiders have bought 2.00k shares worth US$19k. But they sold 34.07k shares for US$697k. In total, Issuer Direct insiders sold more than they bought over the last year. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Issuer Direct Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Issuer Direct shares. Specifically, insiders ditched US$524k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
For a common shareholder, it is worth checking how many shares are held by company 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. It appears that Issuer Direct insiders own 32% of the company, worth about US$22m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Issuer Direct Tell Us?
Insiders haven't bought Issuer Direct stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn't bring confidence, either. But it is good to see that Issuer Direct is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd practice some caution before buying! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Issuer Direct. In terms of investment risks, we've identified 2 warning signs with Issuer Direct and understanding these should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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