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 Ally Financial Inc. (NYSE:ALLY).
What Is Insider Selling?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Ally Financial Insider Transactions Over The Last Year
The insider, Jeffrey Brown, made the biggest insider sale in the last 12 months. That single transaction was for US$2.6m worth of shares at a price of US$27.01 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$30.69. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 13% of Jeffrey Brown's holding.
Over the last year, we can see that insiders have bought 7000 shares worth US$201k. But they sold 112311 for US$3.1m. All up, insiders sold more shares in Ally Financial than they bought, over the last year. You can see the insider transactions (by 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!
I will like Ally 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.
Ally Financial Insiders Are Selling The Stock
The last three months saw significant insider selling at Ally Financial. Specifically, President of Consumer & Commercial Banking Products Diane Morais ditched US$500k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Ally Financial Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Ally Financial insiders own 0.4% of the company, worth about US$46m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Ally Financial Insider Transactions Indicate?
An insider sold Ally Financial shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. But it is good to see that Ally Financial is growing earnings. While insiders do own shares, they don't own a heap, and they have been selling. So we'd only buy after careful consideration. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Ally Financial.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.