Nanji Farhad filed a Form 4 with the SEC on Thursday, March 25. The insider bought 127,725 shares of PennyMac Financial Servs Inc PFSIat $62.98 on Tuesday, Mar 23, and bought 80,461 shares at $62.35 on Wednesday, Mar 24. . After the transactions, the executive's stake in PennyMac Financial Servs Inc. movedto 1,136,136 shares. Shares of PennyMac Financial Servs rose by 0.3% from the previous closing price.
The Importance of Insider Transactions
Insider transactions shouldn't be used primarily to make an investing decision, however an insider transaction can be an important factor in the investing decision.
When an insider buys stock after an important sell off, that can indicate the insider's faith in the success of the organization. Henceforth, if the stock is bought at new highs, it might be because the insider feels that the stock is not overvalued. Insiders who sell stock at new lows could be anticipating some capitulation moment. If the insider sells at new highs, it could point to the intention to "take some profit" and "lock in a gain."
Transaction Codes To Focus On
Investors prefer focusing on transactions which take place in the open market, indicated in the Form 4 with codes P for purchase and S for sale. An open-market transaction means the insider went into the market of their own volition and made an active decision about the potential path for a company and its stock moving forward.
Transaction codes besides P or S aren't relatively important as they are seldom tied to a decision by the executive. For example, transaction code A is indicative of an insider being forced to sell shares to attain compensation. Moreover, transaction code C indicates the conversion of an option.
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