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 we’ll take a look at whether insiders have been buying or selling shares in The Southern Company (NYSE:SO).
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 on the market. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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.’
Southern Insider Transactions Over The Last Year
Executive VP & President of External Affairs Christopher Womack made the biggest insider sale in the last 12 months. That single transaction was for US$953k worth of shares at a price of US$50.36 each. That means that even when the share price was below the current price of US$51.68, an insider wanted to cash in some shares. While their view may have changed since they sold, this isn’t a particularly bullish sign. As a general rule we consider it to be discouraging when insiders are selling below the current price. Please note, however, that this single sale was 60.9% of Christopher Womack’s stake.
Over the last year we saw more insider selling of Southern shares, than buying. They sold for an average price of about US$48.28. It’s not particularly great to see insiders were selling shares at below recent prices. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, 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.
Southern Insiders Are Selling The Stock
We’ve seen more insider selling than insider buying at Southern recently. In that time, Christopher Womack dumped US$953k worth of shares. Meanwhile Henry Clark bought US$100k worth, as we said above. Since the selling really does outweigh the buying, we’d say that these transactions may suggest that some insiders feel the shares are not cheap.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 0.1% of Southern shares, worth about US$61m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Southern Insiders?
Unfortunately, there has been more insider selling of Southern stock, than buying, in the last three months. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. But since Southern is profitable and growing, we’re not too worried by this. While insiders do own shares, they don’t own a heap, and they have been selling. So we’d only buy after careful consideration. Of course, the future is what matters most. So if you are interested in Southern, you should check out this free report on analyst forecasts for the company.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.