Over the last year, a good number of insiders have significantly increased their holdings in Compass Diversified (NYSE:CODI). This is encouraging because it indicates that insiders are more optimistic about the company's prospects.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

The Last 12 Months Of Insider Transactions At Compass Diversified

Over the last year, we can see that the biggest insider purchase was by Partner & CEO Elias Sabo for US$2.0m worth of shares, at about US$22.95 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$21.56). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

While Compass Diversified insiders bought shares during the last year, they didn't sell. 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!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Insiders At Compass Diversified Have Bought Stock Recently

It's good to see that Compass Diversified insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought US$1.1m worth of shares. This could be interpreted as suggesting a positive outlook.

Insider Ownership Of Compass Diversified

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Compass Diversified insiders own 1.7% of the company, worth about US$28m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Compass Diversified Tell Us?

It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Compass Diversified insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we've found that Compass Diversified has 2 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.

Of course Compass Diversified may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com