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 CommScope Holding Company, Inc. (NASDAQ:COMM).
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
CommScope Holding Company Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Marvin Edwards for US$212k worth of shares, at about US$7.08 per share. We do like to see buying, but this purchase was made at well below the current price of US$14.85. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
In the last twelve months CommScope Holding Company insiders were buying shares, but not selling. 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!
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).
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. CommScope Holding Company insiders own about US$53m worth of shares. That equates to 1.8% of the company. 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 CommScope Holding Company Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in CommScope Holding Company and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing CommScope Holding Company. While conducting our analysis, we found that CommScope Holding Company has 3 warning signs and it would be unwise to ignore them.
But note: CommScope Holding Company 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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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