Benzinga | Sep 17, 2020 11:16AM EDT

Insider Buys American Woodmark's Stock

Shares of American Woodmark Inc (NASDAQ:AMWD) moved higher by 0.05% from the previous closing price. A Form 4 filing filed with the SEC on Thursday, September 17 showed that Rodriguez David A bought 587 shares at an

Shares of American Woodmark Inc (NASDAQ:AMWD) moved higher by 0.05% from the previous closing price. A Form 4 filing filed with the SEC on Thursday, September 17 showed that Rodriguez David A bought 587 shares at an average price of $86.27. The transaction moved the executive's stake in American Woodmark Inc. to 587 shares.

The Importance of Insider Transactions

While transactions from an insider shouldn't be used as the sole item to make an investment or trading decision, an insider buying or selling stock in their company can be a good added factor that leads to more conviction in a decision.

Insiders buying stock after a notable sell off can indicate an insider's long-term belief in the success of the company; insiders buying stock at new highs can be an indication the exec doesn't feel the stock is 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

Wall Street tends to focus on insider transactions which take place in the open market, viewed inside a Form 4 filing via 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 other than P or S are often viewed with less conviction as they are often not tied to a decision by the exec. As an example, transaction code C indicates the conversion of an option. Transaction code A indicates the insider may have been forced to sell shares in order to receive compensation the exec was promised upon being hired by a company.