We often see insiders buying up shares in companies that perform well over the long term. 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 Hampton Financial Corporation (CVE:HFC), you may well want to know whether insiders have been buying or selling.
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, rules govern insider transactions, and certain disclosures are required.
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. 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'.
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Hampton Financial Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Executive Chairman & CEO, Peter Deeb, sold CA$255k worth of shares at a price of CA$0.30 per share. While we don't usually like to see insider selling, it's more concerning if the sales take price at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is CA$0.21. So it may not shed much light on insider confidence at current levels. The only individual insider seller over the last year was Peter Deeb.
You can see the insider transactions (by 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 Hampton Financial better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Hampton Financial insiders own 62% of the company, currently worth about CA$3.8m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Hampton Financial Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. While we feel good about high insider ownership of Hampton Financial, we can't say the same about the selling of shares. Along with insider transactions, I recommend checking if Hampton Financial is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Hampton Financial 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.
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