Investors who take an interest in Chimera Investment Corporation (NYSE:CIM) should definitely note that the Independent Chairman of the Board, Gerard Creagh, recently paid US$13.31 per share to buy US$166k worth of the stock. Although the purchase only increased their holding by 10.0%, it is still a solid purchase in our view.
View our latest analysis for Chimera Investment
In the last twelve months, the biggest single purchase by an insider was when insider Jack Macdowell bought US$1.5m worth of shares at a price of US$14.91 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$13.63). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
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. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Chimera Investment is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Chimera Investment insiders own about US$17m worth of shares. That equates to 1.5% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. Given that insiders also own a fair bit of Chimera Investment we think they are probably pretty confident of a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Chimera Investment (1 is a bit concerning!) and we strongly recommend you look at them before investing.
