We often see insiders buying up shares in companies that perform well over the long term. 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 Central Federal Corporation ( NASDAQ:CFBK ).
Do Insider Transactions Matter?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
Central Federal Insider Transactions Over The Last Year
Director David Royer made the biggest insider purchase in the last 12 months. That single transaction was for US$67k worth of shares at a price of US$13.42 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$12.44). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Over the last year, we can see that insiders have bought 6011.37 shares worth US$81k. Central Federal may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by 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!
Central Federal is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Central Federal Have Bought Stock Recently
It's good to see that Central Federal insiders have made notable investments in the company's shares. Overall, 2 insiders shelled out US$72k for shares in the company -- and none sold. This is a positive in our book as it implies some confidence.
Insider Ownership of Central Federal
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Central Federal insiders own about US$9.0m worth of shares. That equates to 16% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Central Federal Tell Us?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. Given that insiders also own a fair bit of Central Federal we think they are probably pretty confident of a bright future. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph .
But note: Central Federal may not be the best stock to buy . So take a peek at this free list of interesting companies with high ROE and low debt.
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