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 Invesco Mortgage Capital Inc. (NYSE:IVR), you may well want to know whether insiders have been buying or selling.
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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’.
See our latest analysis for Invesco Mortgage Capital
Invesco Mortgage Capital Insider Transactions Over The Last Year
The Chief Operating Officer David Lyle made the biggest insider purchase in the last 12 months. That single transaction was for US$84k worth of shares at a price of US$16.82 each. That means that even when the share price was higher than US$2.80 (the recent price), an insider wanted to purchase shares. 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. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Invesco Mortgage Capital insiders may have bought shares in the last year, but they didn’t sell any. 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.
Does Invesco Mortgage Capital Boast High Insider Ownership?
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. From looking at our data, insiders own US$1.3m worth of Invesco Mortgage Capital stock, about 0.3% of the company. We prefer to see high levels of insider ownership.
What Might The Insider Transactions At Invesco Mortgage Capital Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we’d be more comfortable if they owned more Invesco Mortgage Capital stock. 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 3 warning signs for Invesco Mortgage Capital (2 are concerning) you should be aware of.
But note: Invesco Mortgage Capital 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.
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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