A Form 4 filing filed with the SEC on Wednesday, August 26 showed that Dudman William sold 3,000 shares of Ocean Bio-Chem Inc (NASDAQ:OBCI) at an average price of $15.25. The transaction moved the executive's stake in Ocean Bio-Chem Inc. to 259,149 shares. Shares of Ocean Bio-Chem moved higher by 0.1% from the previous closing price.
The Importance of Insider Transactions
Insider transactions shouldn't be used primarily to make an investing decision, however an insider transaction can be an important factor in the investing decision.
Insiders buying stock after a notable sell off can indicate an insider's long-term belief in the success of the company; insiders buying stock at new highs can be an indication the exec doesn't feel the stock is overvalued. Insiders who sell stock at new lows could be anticipating some capitulation moment. If the insider sells at new highs, it could point to the intention to "take some profit" and "lock in a gain."
Transaction Codes To Focus On
Investors prefer focusing on transactions which take place in the open market, indicated in the Form 4 with codes P for purchase and S for sale. An open-market transaction means the insider went into the market of their own volition and made an active decision about the potential path for a company and its stock moving forward.
Transaction codes besides P or S aren't relatively important as they are seldom tied to a decision by the executive. For example, transaction code A is indicative of an insider being forced to sell shares to attain compensation. Moreover, transaction code C indicates the conversion of an option.