Last week, Semler Scientific, Inc. (NASDAQ:SMLR) insiders, who had purchased shares in the previous 12 months were rewarded handsomely. The shares increased by 21% last week, resulting in a US$91m increase in the company's market worth, implying a 68% gain on their initial purchase. As a result, their original purchase of US$1.90m worth of stock is now worth US$3.18m.
Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.
Semler Scientific Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Independent Chairman of the board Eric Semler bought US$1.9m worth of shares at a price of US$37.93 per share. Even though the purchase was made at a significantly lower price than the recent price (US$63.63), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).
Does Semler Scientific Boast High 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. 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 20% of Semler Scientific shares, worth about US$99m. 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 Semler Scientific Tell Us?
The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. Insiders likely see value in Semler Scientific shares, given these transactions (along with notable insider ownership of the company). While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 3 warning signs for Semler Scientific you should be aware of, and 2 of these make us uncomfortable.
Of course Semler Scientific 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 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.
