We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Starwood Property Trust, Inc. (NYSE:STWD), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
Starwood Property Trust Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the COO, General Counsel, Andrew Sossen, for US$240k worth of shares, at about US$19.21 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$24.85. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. 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. This single sale was just 5.7% of Andrew Sossen’s stake. Andrew Sossen was the only individual insider to sell over the last year.
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!
I will like Starwood Property Trust better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Starwood Property Trust
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Starwood Property Trust insiders own about US$285m worth of shares (which is 4.0% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Starwood Property Trust Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. It’s great to see high levels of insider ownership, but looking back over the last year, we don’t gain confidence from the Starwood Property Trust insiders selling. 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, Starwood Property Trust has 5 warning signs (and 2 which don’t sit too well with us) we think you should know about.
Of course Starwood Property Trust may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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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