Insider trading has a dirty reputation among the general public because it can be unfair and highly illegal if not done properly. However, legal insider trading and insider ownership are two very useful pieces of information for investors.
Why It's Important
Company insiders know more about the workings of a company than anyone else. While they are restricted by law from trading based on non-public information, they have unique expertise and exposure to information such as company morale, rumors and business trends.
Just because a stock has high insider ownership doesn’t necessarily mean insiders are extremely bullish. Many companies (especially young companies) pay management at least in part in shares of stock. Those shares may be restricted for a certain amount of time. In addition, a founder/CEO of a company may hold a massive minority stake in a company, single-handedly pushing overall insider ownership levels extremely high. Elon Musk, for example, owns more than 20% of Tesla shares by himself.
In general, it’s good news when a stock has high insider ownership. If company insiders don’t even believe a stock has additional upside, it doesn’t bode well for outside investors. Stocks with high insider ownership also might have lower floats, which means there are less shares free to trade on the public market. This low supply can trigger much larger moves in share price if demand rises due to an earnings beat or other catalyst.
Here are the 16 S&P 500 stocks with the highest insider ownership percentages, according to Finviz.
- Wells Fargo & Co (NYSE: WFC), 77.8% ownership.
- Loews Corporation (NYSE: L), 69.6% ownership.
- Metlife Inc (NYSE: MET), 61.8% ownership.
- Rollins, Inc. (NYSE: ROL), 57.0% ownership.
- Hormel Foods Corp (NYSE: HRL), 48.2% ownership.
- News Corp Class B (NASDAQ: NWS), 39.4% ownership.
- Urban Outfitters, Inc. (NASDAQ: URBN), 37.7% ownership.
- Fox Corp Class B (NASDAQ: FOX), 35.3% ownership.
- Oracle Corporation (NYSE: ORCL), 34.8% ownership.
- Charter Communications Inc (NASDAQ: CHTR), 28.0% ownership.
- Morgan Stanley (NYSE: MS), 23.6% ownership.
- Regeneron Pharmaceuticals Inc (NASDAQ: REGN), 19.4% ownership.
- Kellogg Company (NYSE: K), 18.6% ownership.
- Walgreens Boots Alliance Inc (NASDAQ: WBA), 16.1% ownership.
- Under Armour Inc Class C (NYSE: UA), 15.5% ownership.
- IPG Photonics Corporation (NASDAQ: IPGP), 14.8% ownership.
While insider ownership percentage is important, insider trading can me a much more bullish or bearish catalyst at times. Significant insider buying is literally company management betting their own money that a stock’s share price is headed higher.
Do you agree with this take? Email email@example.com with your thoughts.