Have Insiders Been Buying NexPoint Residential Trust, Inc. (NYSE:NXRT) Shares?
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 NexPoint Residential Trust, Inc. (NYSE:NXRT), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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, most countries require that the company discloses such transactions to the market.
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 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'.
See our latest analysis for NexPoint Residential Trust
The Last 12 Months Of Insider Transactions At NexPoint Residential Trust
The Independent Director Catherine Wood made the biggest insider purchase in the last 12 months. That single transaction was for US$99k worth of shares at a price of US$41.14 each. Even though the purchase was made at a significantly lower price than the recent price (US$48.75), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
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!
NexPoint Residential Trust is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership
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. NexPoint Residential Trust insiders own about US$127m worth of shares (which is 10% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At NexPoint Residential Trust Tell Us?
It doesn't really mean much that no insider has traded NexPoint Residential Trust shares in the last quarter. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like NexPoint Residential Trust insiders think the business has merit. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Be aware that NexPoint Residential Trust is showing 5 warning signs in our investment analysis, and 2 of those don't sit too well with us...
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.
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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