MCBC Holdings, Inc., through its subsidiaries, innovates, designs, manufactures, and markets recreational sport boats in North America and internationally. MCBC Holdings is one of United States’s small-cap stocks that saw some insider selling over the past three months, with insiders divesting from 9.00k shares during this period. It is widely considered that insider selling stock in their own companies is potentially a bearish signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.
Which Insiders Are Selling?
Over the past three months, more shares have been sold than bought by MCBC Holdings’s insiders. In total, individual insiders own less than one million shares in the business, or around 2.55% of total shares outstanding. The following insiders have recently reduced their company holdings: Terry McNew (management) and Timothy Oxley (management and board member) .
Does Selling Activity Reflect Future Growth?
From the outside, MCBC Holdings’s future looks good. Delving deeper into the line items, MCBC Holdings is believed to experience a double-digit top-line growth over the next year, which seems to flow through to its expected earnings growth of 24.13%. High levels of sustained revenue growth as well as improved cost management could see higher levels of future earnings. But this positive outlook is not supported by insiders’ selling activities which may mean they see things differently to the current optimistic situation. Insiders may feel the growth is unsustainable or the market has significantly overvalued the stock.
Did Stock Price Volatility Instigate Selling?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. MCBC Holdings’s shares ranged between $30.94 and $24.49 over the past three months. This suggests moderate volatility with a share price movement of 26.34%. Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal needs.
MCBC Holdings’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, though the positive growth in expected earnings tells us a different story, and the share price movement may be too trivial to cash in on any mispricing. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve compiled two key factors you should look at:
- Financial Health: Does MCBC Holdings have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of MCBC Holdings? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.