In the last year, multiple insiders have substantially increased their holdings of Chimera Investment Corporation (NYSE:CIM) stock, indicating that insiders' optimism about the company's prospects has increased.
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.
In the last twelve months, the biggest single purchase by an insider was when Chief Investment Officer Jack Macdowell bought US$1.5m worth of shares at a price of US$14.91 per share. That means that even when the share price was higher than US$14.19 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months Chimera Investment 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. By clicking on the graph below, you can see the precise details of each insider transaction!
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Insiders own 2.7% of Chimera Investment shares, worth about US$31m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
The fact that there have been no Chimera Investment insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders own shares in Chimera Investment and we see no evidence to suggest they are worried about the future. 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. For example - Chimera Investment has 2 warning signs we think you should be aware of.