It is usually uneventful when a single insider buys stock. However, When quite a few insiders buy shares, as it happened in NexPoint Diversified Real Estate Trust's (NYSE:NXDT) case, it's fantastic news for shareholders.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for NexPoint Diversified Real Estate Trust

The Last 12 Months Of Insider Transactions At NexPoint Diversified Real Estate Trust

In the last twelve months, the biggest single purchase by an insider was when Chairman & President James Dondero bought US$313k worth of shares at a price of US$5.09 per share. So it's clear an insider wanted to buy, at around the current price, which is US$5.42. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. The good news for NexPoint Diversified Real Estate Trust share holders is that insiders were buying at near the current price.

While NexPoint Diversified Real Estate Trust 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 click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 14% of NexPoint Diversified Real Estate Trust shares, worth about US$32m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The NexPoint Diversified Real Estate Trust Insider Transactions Indicate?

It doesn't really mean much that no insider has traded NexPoint Diversified Real Estate Trust shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think NexPoint Diversified Real Estate Trust insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, NexPoint Diversified Real Estate Trust has 4 warning signs (and 3 which are potentially serious) we think you should know about.

Of course NexPoint Diversified Real Estate Trust 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.