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KAR Auction Services, Inc. (NYSE:KAR) Insiders Increased Their Holdings

Simply Wall St
·4 mins read

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we'll take a look at whether insiders have been buying or selling shares in KAR Auction Services, Inc. (NYSE:KAR).

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

Insider transactions are not the most important thing when it comes to long-term investing. 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'.

Check out our latest analysis for KAR Auction Services

The Last 12 Months Of Insider Transactions At KAR Auction Services

Over the last year, we can see that the biggest insider purchase was by Chairman & CEO James Hallett for US$1.0m worth of shares, at about US$16.88 per share. That means that even when the share price was higher than US$13.75 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months KAR Auction Services insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
insider-trading-volume

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 1.0% of KAR Auction Services shares, worth about US$17m. 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 Does This Data Suggest About KAR Auction Services Insiders?

It doesn't really mean much that no insider has traded KAR Auction Services shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think KAR Auction Services insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Be aware that KAR Auction Services is showing 4 warning signs in our investment analysis, and 1 of those is concerning...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.