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 we’ll take a look at whether insiders have been buying or selling shares in Flowers Foods, Inc. (NYSE:FLO).
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
See our latest analysis for Flowers Foods
The Last 12 Months Of Insider Transactions At Flowers Foods
Over the last year, we can see that the biggest insider sale was by the insider, David Singer, for US$1.9m worth of shares, at about US$24.29 per share. So we know that an insider sold shares at around the present share price of US$22.44. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn’t a major concern, though it’s hardly a good sign. David Singer was the only individual insider to sell over the last year.
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!
I will like Flowers Foods better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Flowers Foods insiders own 7.2% of the company, currently worth about US$340m based on the recent share price. 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 Flowers Foods Insider Transactions Indicate?
The fact that there have been no Flowers Foods insider transactions recently certainly doesn’t bother us. It’s great to see high levels of insider ownership, but looking back over the last year, we don’t gain confidence from the Flowers Foods insiders selling. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Flowers Foods. Every company has risks, and we’ve spotted 4 warning signs for Flowers Foods you should know about.
But note: Flowers Foods 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.
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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