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 we'll take a look at whether insiders have been buying or selling shares in PennyMac Financial Services, Inc. (NYSE:PFSI).
Do Insider Transactions Matter?
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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
PennyMac Financial Services Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the insider, Shelia Kurland, for US$15m worth of shares, at about US$62.74 per share. That means that an insider was selling shares at around the current price of US$59.79. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
PennyMac Financial Services insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!NYSE:PFSI Insider Trading Volume July 27th 2021
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Insiders at PennyMac Financial Services Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at PennyMac Financial Services. In total, insider Shelia Kurland sold US$40m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. PennyMac Financial Services insiders own 19% of the company, currently worth about US$763m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About PennyMac Financial Services Insiders?
An insider sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. But since PennyMac Financial Services is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Every company has risks, and we've spotted 4 warning signs for PennyMac Financial Services (of which 2 are a bit unpleasant!) you should know about.
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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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