Longtime readers of the Fool in general, and subscribers to our small-cap-investing wunderkind Motley Fool Hidden Gems in particular, know that one of the primary attributes we seek out in potential winning small-cap investments is insider ownership.
We love to buy companies run by owner/managers. Corporate officers whose personal interests align with those of outside shareholders are good to us -- because they're shareholders, too. And I'm not talking about exercise-some-stock-options-Monday-and-sell-them-on-Tuesday shareholders. We want our investments to be run by long-term owners, owners who consider their company their life's work and who part with their shares only with great reluctance.
When Hidden Gems lead analyst Tom Gardner chose manufactured housing- and mobile home-parts supplier Drew Industries
That said, I don't believe the announcement sounds the knell of doom for Drew shareholders. Over the past year, the company's shares have risen more than 50% in price. Nearly 40% of that gain has come in the few short months since Tom picked it to join the ranks of our market-trouncing stock portfolio. While the facts suggest that company insiders are selling out at the top, that's not necessarily the case.
Remember that Drew has a windfall of new business coming through its doors, as it manufactures parts that mobile home builders such as Fleetwood
Make no mistake: Drew's insider sales announcement does not qualify as "good news" for shareholders. But I'd only term it "bad news" if we see an immediate spate of actual sales, without first seeing further gains in the stock price.
Want to share in the good fortunes of company insiders, and of Motley Fool Hidden Gems members? With just one click of the mouse, you can sign up for a 30-day free trial toHidden Gemsand read all about what's driving these companies' prices up.
Fool contributor Rich Smith does not own shares in any of the companies mentioned in this article.