When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase stock, like in Dow Inc.’s (NYSE:DOW) instance, it’s good news for shareholders.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
The Last 12 Months Of Insider Transactions At Dow
In the last twelve months, the biggest single purchase by an insider was when Chairman & CEO James Fitterling bought US$280k worth of shares at a price of US$56.03 per share. That means that an insider was happy to buy shares at above the current price of US$51.30. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. To us, it’s very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
In the last twelve months Dow insiders were buying shares, but not selling. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insider Ownership Of Dow
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Dow insiders own about US$51m worth of shares. That equates to 0.1% of the company. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Dow Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Dow and we see no evidence to suggest they are worried about the future. 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 example, Dow has 3 warning signs (and 1 which can’t be ignored) we think you should know about.
But note: Dow 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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