Shareholders may want to keep a close watch on Encore Wire Corporation (NASDAQ: WIRE) after insiders sold US $ 735,000 of shares earlier this year
Despite a 9.1% gain in Encore Wire Corporation (NASDAQ: WIRE) share price this week, shareholders should not give up. Even though stock prices were relatively low, insiders chose to sell US $ 735,000 worth of shares over the past year, which may indicate an expected slowdown.
While we never suggest that investors should base their decisions solely on what a company’s directors have done, we consider it foolish to ignore insider trading altogether.
Encore Wire Insider Transactions in the Past Year
Assistant Secretary and Controller Matthew Ford made the biggest insider sale in the past 12 months. This single transaction involved US $ 735,000 of shares priced at US $ 70.00 each. This means that even when the stock price was below the current price of US $ 112, an insider wanted to cash in certain stocks. Generally, we find it disheartening when insiders sell below the current price, as it suggests they were happy with a lower valuation. Please note, however, that sellers can have a variety of reasons for selling, so we are not sure what they think about the stock price. This one-time sale only represented 47% of Matthew Ford’s stake. Matthew Ford has been the only individual insider to sell shares in the past twelve months.
You can see insider trading (by companies and individuals) over the past year shown in the graph below. If you click on the chart you can see all of the individual trades including the stock price, individual and date!
NasdaqGS: WIRE Insider Trading Volume October 19, 2021
If you are like me then you not want to miss it free list of growing companies that insiders buy.
Does Encore Wire pride itself on strong insider ownership?
Looking at the total insider stakes in a company can help you determine if they are aligned with common shareholders. I think it’s a good sign if the insiders own a significant number of shares in the company. Insiders own 2.4% of the shares of Encore Wire, valued at approximately US $ 56 million. This level of insider ownership is good but just short of being particularly noteworthy. It certainly suggests a reasonable degree of alignment.
So what do Encore Wire’s insider trading indicate?
We certainly don’t mind the fact that there haven’t been any insider trading from Encore Wire recently. We don’t take a lot of encouragement from Encore Wire insider trading. But we love that the insiders own a good chunk of the business. So these insider trading can help us build a stock thesis, but it’s also worth knowing the risks this business faces. Note that Encore Wire displays 3 warning signs in our investment analysis, and 2 of them concern …
But beware : Encore Wire may not be the best stock to buy. So take a look at this free list of interesting companies with high ROE and low debt.
For the purposes of this article, insiders are the persons who report their transactions to the relevant regulatory body. We currently account for open market transactions and private assignments, but not derivative transactions.
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