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 we'll take a look at whether insiders have been buying or selling shares in Prudential Financial, Inc. (NYSE:PRU).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. 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'.
The Last 12 Months Of Insider Transactions At Prudential Financial
Over the last year, we can see that the biggest insider sale was by the insider, Nicholas Silitch, for US$743k worth of shares, at about US$90.62 per share. That means that an insider was selling shares at slightly below the current price (US$102). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. 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. We note that the biggest single sale was only 41% of Nicholas Silitch's holding.
Happily, we note that in the last year insiders paid US$281k for 3.78k shares. On the other hand they divested 18.20k shares, for US$1.6m. Over the last year we saw more insider selling of Prudential Financial shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, 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 Prudential 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.
Prudential Financial Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Prudential Financial shares over the last three months. In total, insiders sold US$1.2m worth of shares in that time. On the flip side, insider Wendy Jones spent US$81k on purchasing shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.
Insider Ownership
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Prudential Financial insiders own about US$89m worth of shares. That equates to 0.2% 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.
So What Does This Data Suggest About Prudential Financial Insiders?
The insider sales have outweighed the insider buying, at Prudential Financial, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. While insiders do own shares, they don't own a heap, and they have been selling. We're in no rush to buy! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Prudential Financial. You'd be interested to know, that we found 3 warning signs for Prudential Financial and we suggest you have a look.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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