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 Preferred Bank (NASDAQ:PFBC), 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.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
The Last 12 Months Of Insider Transactions At Preferred Bank
The Independent Director William C. Cheng made the biggest insider purchase in the last 12 months. That single transaction was for US$146k worth of shares at a price of US$49.00 each. So it's clear an insider wanted to buy, at around the current price, which is US$59.55. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. Happily, the Preferred Bank insiders decided to buy shares at close to current prices.
Happily, we note that in the last year insiders paid US$245k for 6.10k shares. But insiders sold 4.00k shares worth US$184k. In total, Preferred Bank insiders bought more than they sold over the last year. The average buy price was around US$40.15. To my mind it is good that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insiders at Preferred Bank Have Sold Stock Recently
We have seen a bit of insider selling at Preferred Bank, over the last three months. US$184k worth of shares were sold by Independent Vice Chairman of the Board Clark Hsu. But the good news is that there was purchasing too , worth US$146k. While it's not great to see insider selling, the net amount sold isn't enough for us to want to read anything into it.
Does Preferred Bank Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Preferred Bank insiders own about US$77m worth of shares. That equates to 8.6% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Preferred Bank Tell Us?
Our data shows a little more insider selling than buying in the last three months. But the difference is small, and thus, not concerning. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Preferred Bank and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Preferred Bank. At Simply Wall St, we found 3 warning signs for Preferred Bank that deserve your attention before buying any shares.
Of course Preferred Bank 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.
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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