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 before you buy or sell SJW Group (NYSE:SJW), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 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 SJW Group
In the last twelve months, the biggest single sale by an insider was when the Chief Corporate Development Officer & Integration Executive, Andrew Walters, sold US$329k worth of shares at a price of US$67.35 per share. So we know that an insider sold shares at around the present share price of US$65.60. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
In the last year SJW Group insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of SJW Group
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. SJW Group insiders own 8.1% of the company, currently worth about US$159m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At SJW Group Tell Us?
It doesn't really mean much that no insider has traded SJW Group shares in the last quarter. While we feel good about high insider ownership of SJW Group, we can't say the same about the selling of shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example, SJW Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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