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 before you buy or sell Ellomay Capital Ltd. (NYSEMKT:ELLO), 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, 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 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'.
Ellomay Capital Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Chairman, Shlomo Nehama, sold US$12m worth of shares at a price of US$27.13 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$31.55. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 11% of Shlomo Nehama's holding. Shlomo Nehama was the only individual insider to sell over the last year.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Ellomay Capital better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. 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's great to see that Ellomay Capital insiders own 31% of the company, worth about US$127m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Ellomay Capital Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Ellomay Capital shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Ellomay Capital insiders selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we've found that Ellomay Capital has 2 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.
Of course Ellomay Capital 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. 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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