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 Vital Farms, Inc. (NASDAQ:VITL).
What Is Insider Buying?
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, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. 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'.
Vital Farms Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Founder & Executive Chairman, Matthew O'Hayer, for US$27m worth of shares, at about US$20.46 per share. So what is clear is that an insider saw fit to sell at around the current price of US$19.50. While we don't usually like to see insider selling, it's more concerning if the sales take place 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.
In the last twelve months insiders purchased 13.00k shares for US$286k. But insiders sold 2.39m shares worth US$49m. Over the last year we saw more insider selling of Vital Farms shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Vital Farms
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. Vital Farms insiders own 37% of the company, currently worth about US$307m 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 Vital Farms Insider Transactions Indicate?
The fact that there have been no Vital Farms 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 Vital Farms insiders 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. Every company has risks, and we've spotted 1 warning sign for Vital Farms you should know about.
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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