It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Summit Materials, Inc. (NYSE:SUM).
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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 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’.
View our latest analysis for Summit Materials
The Last 12 Months Of Insider Transactions At Summit Materials
Over the last year, we can see that the biggest insider purchase was by President Anne Noonan for US$1.0m worth of shares, at about US$15.24 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$34.13. Because it occurred at a lower valuation, it doesn’t tell us much about whether insiders might find today’s price attractive.
Over the last year, we can see that insiders have bought 71.10k shares worth US$1.1m. On the other hand they divested 37.68k shares, for US$957k. In total, Summit Materials insiders bought more than they sold 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at Summit Materials Have Sold Stock Recently
The last quarter saw substantial insider selling of Summit Materials shares. Specifically, insiders ditched US$859k worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. Summit Materials insiders own about US$16m worth of shares. That equates to 0.4% of the company. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Summit Materials Tell Us?
Insiders haven’t bought Summit Materials stock in the last three months, but there was some selling. But we take heart from prior transactions. We like that insiders own a fair amount of the company. So we’re happy enough to look past some selling. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. For instance, we’ve identified 5 warning signs for Summit Materials (1 is potentially serious) you should be aware of.
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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