We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Aerie Pharmaceuticals, Inc. (NASDAQ:AERI).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Aerie Pharmaceuticals Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the CFO, Secretary & Treasurer, Richard Rubino, for US$2.1m worth of shares, at about US$60.17 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$44.68. So it may not shed much light on insider confidence at current levels.
In total, Aerie Pharmaceuticals insiders sold more than they bought over the last year. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Aerie Pharmaceuticals better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Aerie Pharmaceuticals insiders own about US$31m worth of shares. That equates to 1.5% 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 Aerie Pharmaceuticals Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. Our analysis of Aerie Pharmaceuticals insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. Of course, the future is what matters most. So if you are interested in Aerie Pharmaceuticals, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.