We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Bright Horizons Family Solutions Inc. (NYSE:BFAM), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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’.
See our latest analysis for Bright Horizons Family Solutions
The Last 12 Months Of Insider Transactions At Bright Horizons Family Solutions
Over the last year, we can see that the biggest insider sale was by the Non Executive Chairman, David Lissy, for US$4.2m worth of shares, at about US$166 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$171. 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. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. This single sale was just 7.8% of David Lissy’s stake.
In the last twelve months insiders purchased 1.58k shares for US$175k. But insiders sold 62.72k shares worth US$10m. Over the last year we saw more insider selling of Bright Horizons Family Solutions shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Bright Horizons Family Solutions Have Sold Stock Recently
The last three months saw significant insider selling at Bright Horizons Family Solutions. In total, insiders sold US$9.7m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the insiders think that the shares are a bargain.
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. A high insider ownership often makes company leadership more mindful of shareholder interests. Bright Horizons Family Solutions insiders own 1.1% of the company, currently worth about US$108m 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 Do The Bright Horizons Family Solutions Insider Transactions Indicate?
Insiders haven’t bought Bright Horizons Family Solutions stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn’t bring confidence, either. It is good to see high insider ownership, but the insider selling leaves us cautious. 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. Case in point: We’ve spotted 5 warning signs for Bright Horizons Family Solutions you should be aware of.
But note: Bright Horizons Family Solutions 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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