Many Federal Agricultural Mortgage Corporation (NYSE:AGM) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
The Last 12 Months Of Insider Transactions At Federal Agricultural Mortgage
The President & CEO, Bradford Nordholm, made the biggest insider sale in the last 12 months. That single transaction was for US$1.3m worth of shares at a price of US$180 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$186. 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. It is worth noting that this sale was only 38% of Bradford Nordholm's holding.
In the last twelve months insiders purchased 765.45 shares for US$102k. But insiders sold 10.63k shares worth US$1.8m. All up, insiders sold more shares in Federal Agricultural Mortgage than they bought, 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!
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Federal Agricultural Mortgage Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Federal Agricultural Mortgage shares. Specifically, Independent Director Chester Culver ditched US$58k 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 Federal Agricultural Mortgage Boast High Insider Ownership?
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. Insiders own 1.3% of Federal Agricultural Mortgage shares, worth about US$26m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Federal Agricultural Mortgage Insider Transactions Indicate?
An insider hasn't bought Federal Agricultural Mortgage stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Federal Agricultural Mortgage is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd practice some caution before buying! 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 1 warning sign for Federal Agricultural Mortgage you should know about.
But note: Federal Agricultural Mortgage 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.
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 of direct interests only, but not derivative transactions or indirect interests.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.